Derivative Financial Instruments

12 Months Ended

Dec. 31, 2024

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, 2024 and 2023.

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


	December 31, 2024				December 31, 2023
	Fair Value		Notional Amount		Fair Value		Notional Amount
(In Thousands)


Assets - Risk Management Derivatives
Interest rate swaps	$	—	$	—	$	1,742	$	50,000
TBAs	—		—		952		385,000
Interest rate futures	16,446		712,500		—		—
Swaptions	23,738		8,245,000		—		—

Assets - Other Derivatives
LPCs and IRLCs	5,819		919,888		11,518		216,194

Total Assets (1)	$	46,003	$	9,877,388	$	14,212	$	651,194



Liabilities - Risk Management Derivatives

TBAs	$	(16,249)	$	1,350,000	$	(27,020)	$	1,405,000
Interest rate futures	(6,915)		830,500		(3,394)		141,500
Liabilities - Other Derivatives
Loan purchase commitments	(496)		157,985		(3,414)		430,983

Total Liabilities (1)	$	(23,660)	$	2,338,485	$	(33,828)	$	1,977,483
Total Derivative Financial Instruments, Net (1)	$	22,343	$	12,215,873	$	(19,616)	$	2,628,677

(1) For the purpose of this presentation, derivative assets and liabilities are presented on a gross and a net basis.

The following table presents the market valuation gains and losses on our derivatives for the years ended December 31, 2024 and 2023.

Table 12.2 – Market Valuation (Losses) Gains on Derivatives


	Year Ended		Year Ended
(In Thousands)	December 31, 2024		December 31, 2023
Risk Management Derivatives (1)	$	(29,694)	$	(20,303)

LPCs and IRLCs (2)	9,571		22,600



Market Valuation (Losses) Gains on Derivatives	$	(20,123)	$	2,297

(1)Market valuation gains (losses) on risk management derivatives used to manage the mark-to-market risks associated with our Mortgage Banking operations are recorded in Mortgage banking activities, net and market valuation gains (losses) on all other derivatives are recorded in Investment fair value changes, net on our consolidated statements of income.

(2)Market valuation gains (losses) on LPCs and IRLCs are recorded in Mortgage banking activities, net on our consolidated statements of income.

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, 2024, we were party to swaps and swaptions with an aggregate notional amount of $8.25 billion, TBA agreements with an aggregate notional amount of $1.35 billion, and interest rate futures contracts with an aggregate notional amount of $1.54 billion. At December 31, 2023, we were party to 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

For the years ended December 31, 2024, 2023, and 2022, risk management derivatives had net market valuation losses of $30 million, net market valuation losses of $20 million, and net market valuation gains of $184 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 fair values. For the years ended December 31, 2024, 2023, and 2022, LPCs and IRLCs had net market valuation gains of $10 million, net market valuation gains of $23 million, and net market valuation losses of $55 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 $64 million and $68 million at December 31, 2024 and 2023, 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, 2024 and 2023, we reclassified $4 million of realized net losses from Accumulated other comprehensive loss into Interest expense. As of December 31, 2024, 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, 2024, we assessed this risk as remote and did not record a specific valuation adjustment. At December 31, 2024, we were in compliance with our derivative counterparty ISDA agreements.