Derivative Financial Instruments

12 Months Ended

Dec. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Positions and Offsetting

Derivatives Designated in Hedge Relationships. Interest rate swaps allow the Company to change the fixed or variable nature of an interest rate without the exchange of the underlying notional amount. Certain pay fixed/receive variable interest rate swaps are designated as cash flow hedges to effectively convert variable-rate debt into fixed-rate debt, whereas certain receive fixed/pay variable interest rate swaps are designated as fair value hedges to effectively convert fixed-rate long-term debt into variable-rate debt. Certain purchased options are also designated as cash flow hedges. Purchased options allow the Company to limit the potential adverse impact of variable interest rates by establishing a cap rate or floor rate in exchange for an upfront premium. The purchased options designated as cash flow hedges represent interest rate caps where payment is received from the counterparty if interest rates rise above the cap rate, and interest rate floors where payment is received from the counterparty when interest rates fall below the floor rate.

Derivatives Not Designated in Hedge Relationships. The Company also enters into derivative transactions that are not designated in hedge relationships. The Company has a back-to-back swap program, whereby it enters into an interest rate swap with a qualified customer and simultaneously enters into an equal and opposite interest-rate swap with a swap counterparty, to hedge interest rate risk. Derivative assets and derivative liabilities with the same counterparty are presented on a net basis when master netting agreements are in place.

The following tables present the notional amounts and fair values, including accrued interest, of derivative positions:


	At December 31, 2024
	Asset Derivatives				Liability Derivatives
(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated as hedging instruments:
Interest rate derivatives (1)	$	750,000	$	719	$	4,250,000	$	13,169
Not designated as hedging instruments:
Interest rate derivatives (1)	8,693,493		300,120		8,728,767		298,296
Mortgage banking derivatives (2)	584		3		—		—
Other (3)	337,370		1,300		833,449		96
Total not designated as hedging instruments	9,031,447		301,423		9,562,216		298,392
Gross derivative instruments, before netting	$	9,781,447	302,142		$	13,812,216	311,561
Less: Master netting agreements			31,881				31,881
Cash collateral pledged			251,212				80
Total derivative instruments, after netting			$	19,049			$	279,600

	At December 31, 2023
	Asset Derivatives				Liability Derivatives
(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated as hedging instruments:
Interest rate derivatives (1)	$	2,750,000	$	11,140	$	2,700,000	$	13,679
Not designated as hedging instruments:
Interest rate derivatives (1)	8,284,356		319,122		8,272,197		321,064
Mortgage banking derivatives (2)	2,798		37		—		—
Other (3)	340,553		337		731,055		1,067
Total not designated as hedging instruments	8,627,707		319,496		9,003,252		322,131
Gross derivative instruments, before netting	$	11,377,707	330,636		$	11,703,252	335,810
Less: Master netting agreements			55,949				55,949
Cash collateral pledged			232,190				—
Total derivative instruments, after netting			$	42,497			$	279,861

(1)Balances related to clearing houses are presented as a single unit of account. In accordance with their rule books, clearing houses legally characterize variation margin payments as settlement of derivatives rather than collateral against derivative positions. Notional amounts of interest rate swaps cleared through clearing houses included $71.1 million and $113.8 million for asset derivatives at December 31, 2024, and 2023, respectively. The related fair values approximate zero. There were no interest rate swaps cleared through clearing houses for liability derivatives at both December 31, 2024, and 2023.

(2)Notional amounts related to residential loans exclude approved floating rate commitments of $0.4 million and $1.0 million at December 31, 2024, and 2023, respectively.

(3)Other derivatives include foreign currency forward contracts related to lending arrangements, a Visa equity swap transaction, and risk participation agreements. Notional amounts of risk participation agreements include $294.5 million and $299.2 million for asset derivatives and $796.6 million and $682.9 million for liability derivatives at December 31, 2024, and 2023, respectively, which have insignificant related fair values.

The following tables represent the offsetting of derivative financial instruments that are subject to master netting agreements:


	At December 31, 2024
	Gross Amounts of Recognized Assets/Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial position

(In thousands)							Financial Instruments		Cash Collateral Pledged		Net Amount
Asset derivatives	$	283,185	$	31,881	$	251,304	$	—	$	251,212	$	92
Liability derivatives	32,218		31,881		337		—		80		257

	At December 31, 2023
	Gross Amounts of Recognized Assets/Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial position

(In thousands)							Financial Instruments		Cash Collateral Pledged		Net Amount
Asset derivatives	$	289,778	$	55,949	$	233,829	$	—	$	232,190	$	1,639
Liability derivatives	55,949		55,949		—		—		—		—

Derivative Activity

The following table summarizes the income statement effect of derivatives designated as hedging instruments:


	Recognized In	Years ended December 31,
(In thousands)	Net Interest Income	2024		2023		2022
Fair value hedges:
Interest rate derivatives	Deposits interest expense	$	(1,320)	$	3,194	$	—
Hedged item	Deposits interest expense	—		(15)		—
Net recognized on fair value hedges (1)		$	1,320	$	(3,179)	$	—
Cash flow hedges:
Interest rate derivatives	Long-term debt interest expense	$	34	$	310	$	306
Interest rate derivatives	Interest and fees on loans and leases	(42,005)		(14,628)		1,935
Net recognized on cash flow hedges		$	(42,039)	$	(14,938)	$	1,629

(1)The Company de-designated its fair value hedging relationship on $400.0 million of deposits, which pertained to a portion of Ametros’ member deposits, in 2023. The $1.3 million basis adjustment included in the carrying amount of deposits at
December 31, 2023, was amortized into interest expense in January 2024 upon the acquisition of Ametros.

Time-value premiums are excluded from the assessment of hedge effectiveness for purchased options designated as cash flow hedges. During the years ended December 31, 2024, 2023, and 2022, $0.5 million, $2.3 million, and $3.6 million of time-value premiums, respectively, for which a straight-line amortization approach was applied, were recognized in interest income. There were no remaining unamortized time-value premiums at December 31, 2024. Over the next twelve months, an estimated $5.2 million related to cash flow hedge gain or loss will be reclassified from AOCL, decreasing interest income as hedge interest payments are made. Additional information regarding cash flow hedge activity impacting AOCL and the related amounts reclassified to net income can be found within Note 13: Accumulated Other Comprehensive (Loss), Net of Tax. The maximum length of time over which forecasted transactions are hedged is 2.2 years.

The following table summarizes the income statement effect of derivatives not designated as hedging instruments:


	Recognized In	Years ended December 31,
(In thousands)	Non-interest Income	2024		2023		2022
Interest rate derivatives	Other income	$	(1,480)	$	(6,159)	$	25,092
Mortgage banking derivatives	Mortgage banking activities	(34)		5		(48)
Other	Other income	4,246		(2,476)		3,249
Total not designated as hedging instruments		$	2,732	$	(8,630)	$	28,293

Derivative Exposure. At December 31, 2024, the Company had $256.2 million of cash collateral received and $0.1 million of cash collateral posted included in Cash and due from banks on the accompanying Consolidated Balance Sheets. In addition, the Company had $1.7 million in initial margin posted at clearing houses. The Company regularly evaluates the credit risk of its derivative customers, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. Credit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions. Current net credit exposure relating to derivatives with the Bank’s customers was $19.0 million at December 31, 2024. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to derivatives with the Bank’s customers totaled $109.2 million at December 31, 2024. The Company has incorporated a credit valuation adjustment (contra-liability) to reflect non-performance risk in the fair value measurement of its derivatives, which totaled $7.6 million and $6.2 million at December 31, 2024, and 2023, respectively. Various factors impact changes in the valuation adjustment over time, such as changes in the credit spreads of the contracted parties, and changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.