Derivative Financial Instruments

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 11 – DERIVATIVE FINANCIAL INSTRUMENTS

The following table presents the notional amounts and fair values of derivative financial instruments as of December 31:


	2022				2021
	Notional Amount		Asset (Liability) Fair Value		Notional Amount		Asset (Liability) Fair Value
	(dollars in thousands)
Interest Rate Locks with Customers
Positive fair values	$	70,836	$	182	$	261,428	$	2,326
Negative fair values	4,939		(51)		2,549		(23)
Forward Commitments
Positive fair values	—		—		51,000		41
Negative fair values	10,000		(147)		—		—
Interest Rate Derivatives with Customers
Positive fair values	171,317		3,337		3,213,924		153,752
Negative fair values	3,802,480		(280,401)		752,462		(4,766)
Interest Rate Derivatives with Dealer Counterparties
Positive fair values	3,802,480		161,956		752,462		4,766
Negative fair values	171,317		(3,703)		3,213,924		(79,889)
Interest Rate Derivatives used in Cash Flow Hedges
Positive fair values	600,000		1,321		500,000		60
Negative fair values	1,000,000		(12,163)		500,000		(1,432)
Foreign Exchange Contracts with Customers
Positive fair values	11,123		571		7,629		229
Negative fair values	3,672		(85)		3,388		(51)
Foreign Exchange Contracts with Correspondent Banks
Positive fair values	4,887		101		3,656		69
Negative fair values	8,280		(499)		9,364		(240)

The following table presents the effect of fair value and cash flow hedge accounting on AOCI for the years ended December 31, 2022 and 2021:


	Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Recognized in OCI Included Component		Amount of Gain (Loss) Recognized in OCI Excluded Component		Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income Included Component		Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component


	(in thousands)
Derivatives in Cash Flow Hedging Relationships:
Year Ended December 31, 2022
Interest Rate Products	$	(81,400)	$	(81,400)	$	—	Interest Income	$	(7,761)	$	(7,761)	$	—
Year Ended December 31, 2021
Interest Rate Products	(3,452)		(3,452)		—		Interest Income	2,776		2,776		—

The following table presents the effect of fair value and cash flow hedge accounting on the income statement for the years ended December 31:


	Consolidated Statements of Income Classification
	2022				2021
	Interest Income		Interest Expense		Interest Income		Interest Expense
	(in thousands)
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded	$	(7,761)	$	—	$	2,776	$	—


Interest contracts:
Amount of gain (loss) reclassified from AOCI into income	(7,761)		—		2,776		—
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring	—		—		—		—
Amount of gain (loss) reclassified from AOCI into income - included component	(7,761)		—		2,776		—
Amount of gain (loss) reclassified from AOCI into income - excluded component	—		—		—		—

During the next twelve months, the Corporation estimates that an additional $38.5 million will be reclassified as a decrease to interest income.

The following table presents the fair value gains (losses) on derivative financial instruments for the years ended December 31:


	Consolidated Statements of Income Classification	2022		2021		2020
		(dollars in thousands)
Mortgage banking derivatives(1)	Mortgage banking	$	(2,360)	$	(3,392)	$	4,974
Interest rate derivatives	Other expense	—		1,050		70
Foreign exchange contracts	Other income	81		(36)		12
Net fair value gains (losses) on derivative financial instruments		$	(2,279)	$	(2,378)	$	5,056

(1) Includes interest rate locks with customers and forward commitments.

Fair Value Option

The Corporation has elected to measure mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of December 31:


	2022		2021
	(dollars in thousands)
Amortized cost(1)	$	7,180	$	35,050
Fair value	7,264		35,768

(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.

Losses related to changes in fair values of mortgage loans held for sale were $0.6 million for the year ended December 31, 2022. Losses related to changes in fair values of mortgage loans held for sale were $2.5 million for the year ended December 31, 2021, and gains related to changes in fair values of mortgage loans held for sale were $2.8 million for the year ended December 31, 2020. The gains and losses are recorded on the consolidated income statements as an adjustment to mortgage banking income.

Balance Sheet Offsetting

The fair values of interest rate derivative agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets if they are subject to master netting arrangements or similar agreements. The Corporation has elected to net its financial assets and liabilities designated as cash flow hedges when offsetting is permitted. The following table presents the financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets as of December 31:


	Gross Amounts		Gross Amounts Not Offset
	Recognized		on the Consolidated
	on the		Balance Sheets
	Consolidated		Financial		Cash		Net
	Balance Sheets		Instruments(1)		Collateral(2)		Amount
	(in thousands)
2022
Interest rate derivative assets	$	166,614	$	(8,071)	$	—	$	158,543
Foreign exchange derivative assets with correspondent banks	101		(101)		—		—
Total	$	166,715	$	(8,172)	$	—	$	158,543

Interest rate derivative liabilities	$	296,267	$	(2,771)	$	(127,638)	$	165,858
Foreign exchange derivative liabilities with correspondent banks	499		(101)		—		398
Total	$	296,766	$	(2,872)	$	(127,638)	$	166,256

2021
Interest rate derivative assets	$	158,578	$	(8,028)	$	—	$	150,550
Foreign exchange derivative assets with correspondent banks	69		(69)		—		—
Total	$	158,647	$	(8,097)	$	—	$	150,550

Interest rate derivative liabilities	$	86,087	$	(6,656)	$	(74,359)	$	5,072
Foreign exchange derivative liabilities with correspondent banks	240		(69)		—		171
Total	$	86,327	$	(6,725)	$	(74,359)	$	5,243

(1) For interest rate derivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default. For interest rate derivative liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.

(2) Amounts represent cash collateral (pledged by the Corporation) or received from the counterparty on interest rate derivative transactions and foreign exchange contracts with financial institution counterparties. Interest rate derivatives with customers are collateralized by the same collateral securing the underlying loans to those borrowers. Cash collateral amounts are included in the table only to the extent of the net derivative fair values.

Cash Flow Hedge Terminations

In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion. As the hedged transaction continues to be probable, the unrealized losses that have been recorded in AOCI will be recognized as reduction to interest income when the previously forecasted hedged item affects earnings in future periods.