v3.26.3
Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Note 6    Derivative Financial Instruments
Derivatives designated as hedging instruments
The Company has entered into interest rate derivatives designated as cash flow hedges with the objective of limiting the variability of interest payment cash flows. Changes in fair value of derivative instruments designated as cash flow hedges are reported in accumulated other comprehensive income.

The Company also enters into interest rate derivatives designated as fair value hedges with the objective of managing exposure to changes in the fair value of certain fixed-rate financial liabilities attributable to changes in benchmark interest rates. Changes in the fair value of derivative instruments designated as fair value hedges and changes in the fair value of the hedged liabilities attributable to the designated hedged risk are recognized currently in earnings in the same income statement line item as the earnings effect of the hedged liabilities.
The following table summarizes the Company's derivatives designated as hedging instruments as of the dates indicated (in thousands):
September 30, 2026December 31, 2025
Notional Amount
Fair Value(1)
Notional Amount
Fair Value(1)
AssetLiabilityAssetLiability
Derivatives designated as cash flow hedges:
Interest rate swaps$2,775,000 $129 $(33,171)$4,555,000 $7,104 $(1,955)
Interest rate collar— — — 125,000 1 — 
Derivatives designated as fair value hedges:
Interest rate swaps539,000 — — — — — 
$3,314,000 $129 $(33,171)$4,680,000 $7,105 $(1,955)
(1)The fair values of derivatives are included in other assets or other liabilities in the consolidated balance sheets.
Cash Flow Hedges
The following table provides information about the amount of gain (loss) related to derivatives designated as cash flow hedges reclassified from AOCI into interest income or expense for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Location of gain (loss) reclassified from AOCI into income:
Interest expense on deposits$— $832 $— $3,009 
Interest expense on borrowings405 4,404 1,885 15,519 
Interest income on loans617 (1,563)1,975 (4,172)
$1,022 $3,673 $3,860 $14,356 
During the three and nine months ended September 30, 2026 and 2025, no derivative positions designated as cash flow hedges were discontinued and none of the gains and losses reported in AOCI were reclassified into earnings as a result of the discontinuance of cash flow hedges or because of the early extinguishment of debt.
As of September 30, 2026, the amount of net loss expected to be reclassified from AOCI into earnings during the next 12 months was $16.6 million, based on the forward curve. See Note 7 to the consolidated financial statements for additional information about the reclassification adjustments from AOCI into earnings.
Fair Value Hedges

During the third quarter of 2026, the Company entered into multiple receive-fixed, pay-variable interest rate swaps with an aggregate notional amount of $539 million and designated the swaps as fair value hedges of benchmark interest rate risk associated with certain fixed-rate brokered certificates of deposit. The swaps became effective during the third quarter of 2026 and mature in 2027.

The following table presents the effect of fair value hedge accounting on the consolidated statements of income for the period indicated (in thousands):

Three and Nine Months Ended September 30, 2026
Income Statement LocationGain (loss) on derivativesGain (loss) on hedge itemsTotal gain (loss)
Interest expense on deposits$(33)$33 $— 

The following table presents the carrying amount of hedged liabilities and the cumulative amount of fair value hedge basis adjustments included in the carrying amount of such liabilities as of September 30, 2026 (in thousands):
Balance Sheet Line Item in Which the Hedged Liability is includedCarrying AmountCumulative Fair Value Hedge Basis Adjustment
Deposits$539,000 $33 

Derivatives not designated as hedging instruments
The Company enters into interest rate derivative contracts with certain of its commercial borrowers to enable those borrowers to manage their exposure to interest rate fluctuations. To mitigate interest rate risk associated with these derivative contracts, the Company enters into offsetting derivative contract positions with primary dealers. In addition, the Company purchases and sells credit protection under RPAs with the objective of sharing with financial institution counterparties some of the credit exposure related to interest rate derivative contracts entered into with commercial borrowers related to participations purchased or sold. The Company will make or receive payments under these agreements if a customer defaults on an obligation to perform under certain interest rate derivative contracts. The Company also enters into foreign currency forward derivative contracts with commercial borrowers to enable borrowers to manage their exposure to foreign currency fluctuations. The Company enters into offsetting forward contracts with primary dealers to mitigate the foreign currency risk associated with these contracts.
These derivative contracts are not designated as hedging instruments; therefore, changes in the fair value of these derivatives are recognized in earnings. Fees recognized related to these derivative instruments were $4.6 million and $14.0 million for the three and nine months ended September 30, 2026, respectively, and $5.0 million and $11.9 million for the three and nine months ended September 30, 2025. These fees are included in "capital markets income" in the accompanying consolidated statements of income.
The Company may be exposed to credit risk in the event of non-performance by the counterparties to its commercial customer derivative agreements. The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit rating and financial information. The Company manages dealer credit risk by entering into derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, central clearing mechanisms and counterparty limits. The agreements contain bilateral collateral arrangements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its commercial borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company does not currently anticipate any significant losses from failure of derivative counterparties to honor their obligations.
The following table summarizes the Company's derivatives not designated as hedging instruments as of the dates indicated (in thousands):
September 30, 2026December 31, 2025
Notional Amount
Fair Value(1)
Notional Amount
Fair Value(1)
AssetLiabilityAssetLiability
Pay-fixed interest rate swaps$5,010,600 $140,040 $(629)$4,136,758 $26,526 $(50,883)
Pay-variable interest rate swaps5,010,600 630 (140,537)4,136,758 51,012 (26,526)
Interest rate caps and collars purchased
323,030 4,947 — 280,537 198 (42)
Interest rate caps and collars sold
323,030 — (4,947)280,537 42 (198)
RPAs purchased306,178 102 — 245,198 273 — 
RPAs sold418,123 — (50)357,889 — (212)
$11,391,561 $145,719 $(146,163)$9,437,677 $78,051 $(77,861)
(1)Fair values of these derivatives are included in other assets and other liabilities in the consolidated balance sheets. The notional amount and fair value of the foreign currency forward derivative contracts not designated as hedging instruments were not significant at September 30, 2026 and December 31, 2025.
Some of the Company’s ISDA master agreements with financial institution counterparties contain provisions that permit either counterparty to terminate the agreements and require settlement in the event that regulatory capital ratios fall below certain designated thresholds, upon the initiation of other defined regulatory actions or upon suspension or withdrawal of the Bank’s credit rating. Currently, there are no circumstances that would trigger these provisions of the agreements.
Master netting agreements
The Company does not offset assets and liabilities under master netting agreements for financial reporting purposes. Information on interest rate derivative instruments subject to these agreements is as follows at the dates indicated (in thousands):
September 30, 2026
Gross Amounts Offset in Balance
Sheet		Net Amounts Presented in
Balance Sheet		Gross Amounts Not Offset in
Balance Sheet
Gross Amounts
Recognized		Derivative
Instruments		Collateral
Pledged		Net Amount
Derivative assets$145,116 $— $145,116 $(33,800)$(107,024)$4,292 
Derivative liabilities(33,800)— (33,800)33,800 — — 
$111,316 $— $111,316 $— $(107,024)$4,292 
December 31, 2025
Gross Amounts Offset in Balance
Sheet		Net Amounts Presented in
Balance Sheet		Gross Amounts Not Offset in
Balance Sheet
Gross Amounts
Recognized		Derivative
Instruments		Collateral
Pledged		Net Amount
Derivative assets$33,829 $— $33,829 $(23,382)$(9,258)$1,189 
Derivative liabilities(52,880)— (52,880)23,382 29,498 — 
$(19,051)$— $(19,051)$— $20,240 $1,189 
The difference between the amounts reported for interest rate swaps subject to master netting agreements and the total fair value of interest rate contract derivative financial instruments reported in the consolidated balance sheets is related to interest rate derivative contracts not subject to master netting agreements.