Derivative Financial Instruments

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table presents the fair value and notional amount of our derivative financial instruments at June 30, 2022 and December 31, 2021.

Table 11.1 – Fair Value and Notional Amount of Derivative Financial Instruments


	June 30, 2022				December 31, 2021
	Fair Value		Notional Amount		Fair Value		Notional Amount
(In Thousands)


Assets - Risk Management Derivatives
Interest rate swaps	$	19,113	$	644,000	$	611	$	161,500
TBAs	3,104		455,000		2,880		2,440,000
Interest rate futures	1,875		273,600		25		9,000
Swaptions	10,488		620,000		18,318		1,660,000

Assets - Other Derivatives
Loan purchase and interest rate lock commitments	2,007		235,723		4,633		971,631

Total Assets	$	36,587	$	2,228,323	$	26,467	$	5,242,131



Liabilities - Risk Management Derivatives
Interest rate swaps	$	(2,445)	$	226,000	$	(1,251)	$	283,100
TBAs	(2,004)		405,000		(658)		870,000
Interest rate futures	(1,615)		115,000		(905)		62,500
Liabilities - Other Derivatives
Loan purchase and interest rate lock commitments	(527)		50,947		(503)		404,190

Total Liabilities	$	(6,591)	$	796,947	$	(3,317)	$	1,619,790
Total Derivative Financial Instruments, Net	$	29,996	$	3,025,270	$	23,150	$	6,861,921

Risk Management Derivatives

To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheets, we may enter into derivative contracts. At June 30, 2022, we were party to swaps and swaptions with an aggregate notional amount of $1.49 billion, TBA agreements with an aggregate notional amount of $860 million, and interest rate futures contracts with an aggregate notional amount of $389 million. At December 31, 2021, we were party to swaps and swaptions with an aggregate notional amount of $2.10 billion, futures with an aggregate notional amount of $72 million and TBA agreements with an aggregate notional amount of $3.31 billion.

For the three and six months ended June 30, 2022, risk management derivatives had a net market valuation gain of $30 million, and a net market valuation gain of $122 million, respectively. For the three and six months ended June 30, 2021, risk management derivatives had a net market valuation loss of $58 million, and a net market valuation gain of $35 million, respectively. Market valuation gains and losses are recorded in Mortgage banking activities, net, Investment fair value changes, net and Other income on our consolidated statements of income.

Loan Purchase and Interest Rate Lock Commitments

Loan purchase commitments ("LPCs") and interest rate lock commitments ("IRLCs") that qualify as derivatives are recorded at their estimated fair values. For the three and six months ended June 30, 2022, LPCs and IRLCs had a net market valuation loss of $9 million and loss of $51 million, respectively, that were recorded in Mortgage banking activities, net on our consolidated statements of income.

Derivatives Designated as Cash Flow Hedges

For interest rate agreements previously designated as cash flow hedges, our total unrealized loss reported in Accumulated other comprehensive income was $74 million and $76 million at June 30, 2022 and December 31, 2021, respectively. We are amortizing this loss into interest expense over the remaining term of the debt they were originally hedging. As of June 30, 2022, we expect to amortize $4 million of realized losses related to terminated cash flow hedges into interest expense over the next twelve months.

The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three and six months ended June 30, 2022 and 2021.

Table 11.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net interest expense on cash flows hedges	$	—	$	—	$	—	$	—

Realized net losses reclassified from other comprehensive income	(1,029)		(1,028)		(2,047)		(2,046)
Total Interest Expense	$	(1,029)	$	(1,028)	$	(2,047)	$	(2,046)

Derivative Counterparty Credit Risk

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At June 30, 2022, we assessed this risk as remote and did not record an associated specific valuation adjustment. At June 30, 2022, we were in compliance with our derivative counterparty ISDA agreements.