Derivative Financial Instruments

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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

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


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


Assets - Risk Management Derivatives
Interest rate swaps	$	1,742	$	50,000	$	14,625	$	285,000
TBAs	952		385,000		1,893		220,000
Interest rate futures	—		—		3,976		350,600


Assets - Other Derivatives
Loan purchase and interest rate lock commitments	11,518		216,194		336		8,166

Total Assets	$	14,212	$	651,194	$	20,830	$	863,766



Liabilities - Risk Management Derivatives

TBAs	$	(27,020)	$	1,405,000	$	(16,784)	$	845,000
Interest rate futures	(3,394)		141,500		(57)		60,000
Liabilities - Other Derivatives
Loan purchase and interest rate lock commitments	(3,414)		430,983		(14)		3,532

Total Liabilities	$	(33,828)	$	1,977,483	$	(16,855)	$	908,532
Total Derivative Financial Instruments, Net	$	(19,616)	$	2,628,677	$	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 December 31, 2023, we were party to swaps and swaptions with an aggregate notional amount of $50 million, TBA agreements with an aggregate notional amount of $1.79 billion, and interest rate futures contracts with an aggregate notional amount of $142 million. At December 31, 2022, we were party to swaps and swaptions with an aggregate notional amount of $285 million, TBA agreements with an aggregate notional amount of $1.07 billion, and interest rate futures contracts with an aggregate notional amount of $411 million

For the years ended December 31, 2023, 2022, and 2021, risk management derivatives had net market valuation losses of $20 million, net market valuation gains of $184 million, and net market valuation gains of $41 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 (loss).

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 years ended December 31, 2023, 2022, and 2021, LPCs and IRLCs had a net market valuation gains of $23 million, a net market valuation losses of $55 million, and a net market valuation gain of $11 million, respectively, that were recorded in Mortgage banking activities, net on our consolidated statements of income (loss).

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 $68 million and $72 million at December 31, 2023 and 2022, respectively. We are amortizing this loss into interest expense over the remaining term of our trust preferred securities and subordinated notes For both the years ended December 31, 2023 and 2022, we reclassified $4 million, of realized net losses from Accumulated other comprehensive loss into Interest expense. As of December 31, 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

We incur credit risk to the extent that counterparties to our derivative financial instruments do not perform their obligations under specified contractual agreements. If a derivative counterparty does not perform, we may not receive the proceeds to which we may be entitled under these agreements. Each of our derivative counterparties that is not a clearinghouse must maintain compliance with International Swaps and Derivatives Association (“ISDA”) agreements or other similar agreements (or receive a waiver of non-compliance after a specific assessment) in order to conduct derivative transactions with us. Additionally, we review non-clearinghouse derivative counterparty credit standings, and in the case of a deterioration of creditworthiness, appropriate remedial action is taken. To further mitigate counterparty risk, we exit derivatives contracts with counterparties that (i) do not maintain compliance with (or obtain a waiver from) the terms of their ISDA or other agreements with us; or (ii) do not meet internally established guidelines regarding creditworthiness. Our ISDA and similar agreements currently require full bilateral collateralization of unrealized loss exposures with our derivative counterparties. Through a margin posting process, our positions are revalued with counterparties each business day and cash margin is generally transferred to either us or our derivative counterparties as collateral based upon the directional changes in fair value of the positions. We also attempt to transact with several different counterparties in order to reduce our specific counterparty exposure. With respect to certain of our derivatives, clearing and settlement is through one or more clearinghouses, which may be substituted as a counterparty. Clearing and settlement of derivative transactions through a clearinghouse is also intended to reduce specific counterparty exposure. We consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At December 31, 2023, we assessed this risk as remote and did not record a specific valuation adjustment. At December 31, 2023, we were in compliance with our derivative counterparty ISDA agreements.