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Derivatives | 3 Months Ended
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Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives The Bank may use derivatives to hedge the risk of changes in the fair values of interest rate lock commitments, residential mortgage loans held for sale, and MSRs. None of the Company's derivatives are designated as hedging instruments. Rather, they are accounted for as free-standing derivatives, or economic hedges, with changes in the fair value of the derivatives reported in income. The Company utilizes forward interest rate contracts in its derivative risk management strategy. The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to broker-dealers at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage interest rate lock commitments. Credit risk associated with forward contracts is limited to the replacement cost of those forward contracts in a gain position. There were no counterparty default losses on forward contracts in the three months ended March 31, 2024 and 2023. Market risk with respect to forward contracts arises principally from changes in the value of contractual positions due to changes in interest rates. The Bank limits its exposure to market risk by monitoring differences between commitments to customers and forward contracts with broker-dealers. In the event the Company has forward delivery contract commitments in excess of available mortgage loans, the Company completes the transaction by either paying or receiving a fee to or from the broker-dealer equal to the increase or decrease in the market value of the forward contract. As of March 31, 2024 and December 31, 2023, the Bank had commitments to originate mortgage loans held for sale totaling $40.7 million and $20.6 million, respectively, and forward sales commitments of $68.2 million and $39.5 million, respectively, which are used to hedge both on-balance sheet and off-balance sheet exposures. The Bank purchases interest rate futures and forward settling mortgage-backed securities to hedge the interest rate risk of MSRs. As of March 31, 2024, the Bank had $156.0 million notional of interest rate futures contracts and $17.0 million of mortgage-backed securities related to this program. As of December 31, 2023, the Bank had $150.0 million notional of interest rate futures contracts and $36.0 million of mortgage-backed securities related to this program. The Bank executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting the interest rate swaps that the Bank executes with a third party, such that the Bank minimizes its net risk exposure. As of March 31, 2024, the Bank had interest rate swap assets with a $4.5 billion notional amount and interest swap rate liabilities with a $4.7 billion notional amount related to this program. As of December 31, 2023, the Bank had interest rate swap assets and interest rate swap liabilities, both with a notional amount of $4.7 billion related to this program. The Bank has collateral posting requirements for initial margins with its clearing members and clearing houses and has been required to post collateral against its obligations under these agreements of $85.6 million and $88.3 million as of March 31, 2024 and December 31, 2023, respectively. The Bank's clearable interest rate swap derivatives are cleared through the Chicago Mercantile Exchange and London Clearing House. These clearing houses characterize the variation margin payments, for certain derivative contracts that are referred to as settled-to-market, as settlements of the derivative's mark-to-market exposure and not collateral. The Company accounts for the variation margin as an adjustment to cash collateral, as well as a corresponding adjustment to the derivative asset and liability. As of March 31, 2024 and December 31, 2023, the variation margin netting adjustments for centrally cleared interest rate swaps consisted of derivative asset adjustments of $200.3 million and $166.3 million, respectively. The Bank also has solely executed swaps indexed to Term SOFR, which are not clearable. These swaps are executed on a bilateral basis with a counterparty bank. There is no initial margin posted for bilateral swaps, but cash collateral equivalent to variation margin is exchanged to cover the mark-to-market exposure on a daily basis. The Bank also executes foreign currency hedges as a service for customers. These foreign currency hedges are then offset with hedges with other third-party banks to limit the Bank's risk exposure. The Bank's derivative assets are included in other assets on the Condensed Consolidated Balance Sheets, while the derivative liabilities are included in other liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes the types of derivatives, separately by assets and liabilities, and the fair values of such derivatives as of the dates presented:
(in thousands) |  | Asset Derivatives |  | Liability Derivatives
Derivatives not designated as hedging instrument |  | March 31, 2024 |  | December 31, 2023 |  | March 31, 2024 |  | December 31, 2023
Interest rate lock commitments |  | $ | 16 |  |  | $ | — |  |  | $ | — |  |  | $ | 137 |
Interest rate futures |  | — |  |  | 3,745 |  |  | 1,134 |  |  | — |
Interest rate forward sales commitments |  | 74 |  |  | 9 |  |  | 188 |  |  | 535 |
Interest rate swaps |  | 114,347 |  |  | 33,874 |  |  | 310,985 |  |  | 260,064 |
Foreign currency derivatives |  | 326 |  |  | 457 |  |  | 182 |  |  | 355 |
Total derivative assets and liabilities |  | $ | 114,763 |  |  | $ | 38,085 |  |  | $ | 312,489 |  |  | $ | 261,091 |
The gains and losses on the Company's mortgage banking derivatives are included in mortgage banking revenue. The gains and losses on the Company's interest rate swaps and foreign currency derivatives are included in other income. The following table summarizes the types of derivatives and the gains (losses) recorded during the periods indicated:
(in thousands) |  | Three Months Ended |  |
Derivatives not designated as hedging instrument |  | March 31, 2024 |  | March 31, 2023 |  |  |  |
Interest rate lock commitments |  | $ | 153 |  |  | $ | 105 |  |  |  |  |
Interest rate futures |  | (4,271) |  |  | 2,650 |  |  |  |  |
Interest rate forward sales commitments |  | 46 |  |  | (1,003) |  |  |  |  |
Interest rate swaps |  | 1,197 |  |  | (3,543) |  |  |  |  |
Foreign currency derivatives |  | 42 |  |  | 30 |  |  |  |  |
Total derivative losses |  | $ | (2,833) |  |  | $ | (1,761) |  |  |  |  |
The Company is party to interest rate swap contracts that are subject to enforceable master netting arrangements or similar agreements. Under these agreements, the Company may have the right to net settle multiple contracts with the same counterparty. The following table shows the gross interest rate swaps in the Condensed Consolidated Balance Sheets and the respective collateral received or pledged in the form of cash or other financial instruments. The collateral amounts are limited to the outstanding balances of the related asset or liability. Therefore, instances of over collateralization are not shown.
|  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position
| Gross Amounts of Recognized Assets/Liabilities |  | Gross Amounts Offset in the Condensed Consolidated Balance Sheets |  | Net Amounts of Assets/Liabilities presented in the Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Collateral Received/Posted |  | Net Amount
March 31, 2024 |  |  |  |  |  |  |  |  |  |  |
Derivative Assets |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 114,347 |  |  | $ | — |  |  | $ | 114,347 |  |  | $ | 9,623 |  |  | $ | 98,026 |  |  | $ | 6,698 |
Derivative Liabilities |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 310,985 |  |  | $ | — |  |  | $ | 310,985 |  |  | $ | 9,623 |  |  | $ | — |  |  | $ | 301,362 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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