Derivative Financial Instruments

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table presents the fair value and notional amount of our derivative financial instruments at September 30, 2023 and December 31, 2022.

Table 12.1 – Fair Value and Notional Amount of Derivative Financial Instruments


	September 30, 2023				December 31, 2022
	Fair Value		Notional Amount		Fair Value		Notional Amount
(In Thousands)


Assets - Risk Management Derivatives
Interest rate swaps	$	13,819	$	190,000	$	14,625	$	285,000
TBAs	16,613		1,560,000		1,893		220,000
Interest rate futures	2,187		136,200		3,976		350,600

Assets - Other Derivatives
Loan purchase and interest rate lock commitments	5,067		288,637		336		8,166

Total Assets	$	37,686	$	2,174,837	$	20,830	$	863,766



Liabilities - Risk Management Derivatives

TBAs	$	(5,495)	$	425,000	$	(16,784)	$	845,000
Interest rate futures	(199)		67,700		(57)		60,000
Liabilities - Other Derivatives
Loan purchase and interest rate lock commitments	(3,087)		606,170		(14)		3,532

Total Liabilities	$	(8,781)	$	1,098,870	$	(16,855)	$	908,532
Total Derivative Financial Instruments, Net	$	28,905	$	3,273,707	$	3,975	$	1,772,298

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 September 30, 2023, we were party to swaps and swaptions with an aggregate notional amount of $190 million, TBA agreements with an aggregate notional amount of $2 billion, and interest rate futures contracts with an aggregate notional amount of $204 million. At December 31, 2022, we were party to swaps and swaptions with an aggregate notional amount of $285 million, futures with an aggregate notional amount of $411 million and TBA agreements with an aggregate notional amount of $1.07 billion.

For the three and nine months ended September 30, 2023, risk management derivatives had net market valuation gains of $23 million and gains of $18 million, respectively. For the three and nine months ended September 30, 2022, risk management derivatives had net market valuation gains of $76 million and gains of $198 million, respectively. These market valuation gains and losses are recorded in Mortgage banking activities, net and Investment fair value changes, net 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 nine months ended September 30, 2023, LPCs and IRLCs had net market valuation gains of $6 million and gains of $8 million, respectively, which were recorded in Mortgage banking activities, net on our consolidated statements of income. For the three and nine months ended September 30, 2022, LPCs and IRLCs had net market valuation losses of $3 million and losses of $54 million, respectively, which 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 loss was $69 million and $72 million at September 30, 2023 and December 31, 2022, respectively. We are amortizing this loss into interest expense over the remaining term of our trust preferred securities and subordinated notes. For each of the three and nine months ended September 30, 2023 and 2022, we reclassified $1 million and $3 million, respectively, of realized net losses from Accumulated other comprehensive loss into Interest expense. As of September 30, 2023, we expect to amortize $4 million of realized losses related to terminated cash flow hedges into interest expense over the next twelve months.

Derivative Counterparty Credit Risk

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At September 30, 2023, we assessed this risk as remote and did not record an associated specific valuation adjustment. At September 30, 2023, we were in compliance with our derivative counterparty ISDA agreements.