The Company primarily enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates. Derivative instruments represent contracts between parties that result in one party delivering cash to the other party based on a notional amount and an underlying term (such as a rate, security price or price index or commodity price) as specified in the contract. The amount of cash delivered from one party to the other is determined based on the interaction of the notional amount of the contract with the underlying term. Derivatives are also implicit in certain contracts and commitments.

The derivative financial instruments currently used by the Company to manage its exposure to interest rate risk include: (1) interest rate swaps and collars to manage the interest rate risk of certain fixed and variable rate assets and variable rate liabilities; (2) interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market; (3) forward commitments for the future delivery of such mortgage loans to protect the Company from adverse changes in interest rates and corresponding changes in the value of mortgage loans held-for-sale; (4) covered call options to economically hedge specific investment securities and receive fee income, effectively enhancing the overall yield on such securities to compensate for net interest margin compression; and (5) options and swaps to economically hedge a portion of the fair value adjustments related to the Company’s mortgage servicing rights portfolio. The Company also enters into derivatives (typically interest rate swaps and commodity forward contracts) with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently enters into mirror-image derivatives with a third party counterparty, effectively making a market in the derivatives for such borrowers. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain foreign currency denominated assets.

The Company recognizes derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. The Company records derivative assets and derivative liabilities on the Consolidated Statements of Condition within accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively. Changes in the fair value of derivative financial instruments are either recognized in income or in shareholders’ equity as a component of accumulated other comprehensive income or loss depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or cash flow hedge.

Changes in fair values of derivatives accounted for as fair value hedges are recorded in income in the same period and in the same income statement line as changes in the fair values of the hedged items that relate to the hedged risk(s). Changes in fair values of derivative financial instruments accounted for as cash flow hedges are recorded as a component of accumulated other comprehensive income or loss, net of deferred taxes, and reclassified to earnings when the hedged transaction affects earnings. Changes in fair values of derivative financial instruments not designated in a hedging relationship pursuant to ASC 815 are reported in non-interest income during the period of the change. Derivative financial instruments are valued by a third party and are corroborated by comparison with valuations provided by the respective counterparties. Fair values of certain mortgage banking derivatives (interest rate lock commitments and forward commitments to sell mortgage loans) are estimated based on changes in mortgage interest rates from the date of the loan commitment. The fair value of foreign currency derivatives is computed based on changes in foreign currency rates stated in the contract compared to those prevailing at the measurement date. Commodity derivative fair values are computed based on changes in the price per unit stated in the contract compared to those prevailing at the measurement date.


	Derivative Assets						Derivative Liabilities
(In thousands)	September 30, 2023		December 31, 2022		September 30, 2022		September 30, 2023		December 31, 2022		September 30, 2022
Derivatives designated as hedging instruments under ASC 815:
Interest rate derivatives designated as Cash Flow Hedges	$	—	$	—	$	725	$	157,355	$	58,198	$	71,427
Interest rate derivatives designated as Fair Value Hedges	17,929		16,768		17,543		—		—		—
Total derivatives designated as hedging instruments under ASC 815	$	17,929	$	16,768	$	18,268	$	157,355	$	58,198	$	71,427
Derivatives not designated as hedging instruments under ASC 815:
Interest rate derivatives	$	294,324	$	269,670	$	281,030	$	295,916	$	271,109	$	281,999
Interest rate lock commitments	2,516		1,711		141		72		58		273
Forward commitments to sell mortgage loans	3,261		220		10,896		—		414		326
Commodity forward contracts	1,320		257		—		1,076		162		—
Foreign exchange contracts	4,355		8,222		3,145		4,287		8,137		3,145
Total derivatives not designated as hedging instruments under ASC 815	$	305,776	$	280,080	$	295,212	$	301,351	$	279,880	$	285,743
Total Derivatives	$	323,705	$	296,848	$	313,480	$	458,706	$	338,078	$	357,170

The Company’s objectives in using interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and interest rate collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts to or from a counterparty in exchange for the Company receiving or paying fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the settlement of amounts in which the interest rate index specified in the contract exceeds the agreed upon cap strike price or in which the interest rate index specified in the contract is below the agreed upon floor strike price at the end of each period.

As of September 30, 2023, the Company had various interest rate collar and swap derivatives designated as cash flow hedges of variable rate loans and various interest rate swap derivatives designated as cash flow hedges of variable rate deposits. When the relationship between the hedged item and hedging instrument is highly effective at achieving offsetting changes in cash flows attributable to the hedged risk, changes in the fair value of these cash flow hedges are recorded in accumulated other comprehensive income or loss and are subsequently reclassified to interest income as interest payments are made on such


	September 30, 2023
	Notional		Fair Value
(In thousands)	Amount		Asset (Liability)
Interest Rate Collars at 1-month CME term SOFR:

Buy 2.250% floor, sell 3.743% cap; matures September 2025	$	1,250,000	$	(29,642)
Buy 2.750% floor, sell 4.320% cap; matures October 2026	500,000		(8,736)
Buy 2.000% floor, sell 3.450% cap; matures September 2027	1,250,000		(55,052)
Interest Rate Swaps at 1-month CME term SOFR:
Fixed 3.748%; matures December 2025	250,000		(5,204)
Fixed 3.759%; matures December 2025	250,000		(5,147)
Fixed 3.680%; matures February 2026	250,000		(5,921)
Fixed 4.176%; matures March 2026	250,000		(3,100)
Fixed 3.915%; matures March 2026	250,000		(4,598)
Fixed 4.450%; matures July 2026	250,000		(1,066)
Fixed 3.515%, matures December 2026	250,000		(7,133)
Fixed 3.512%; matures December 2026	250,000		(7,155)
Fixed 3.453%; matures February 2027	250,000		(8,039)
Fixed 4.150%; matures July 2027	250,000		(2,299)
Fixed 3.748%; matures March 2028	250,000		(5,948)
Fixed 3.526%; matures March 2028	250,000		(8,191)
Fixed 3.933%; matures October 2029	350,000		(124)
Total Cash Flow Hedges	$	6,350,000	$	(157,355)

In the first quarter of 2022, the Company terminated interest rate swap derivative contracts designated as cash flow hedges of variable rate deposits with a total notional value of $1.0 billion and a five-year term effective July 2022. At the time of termination, the fair value of the derivative contracts totaled an asset of $66.5 million, with such adjustments to fair value recorded in accumulated other comprehensive income or loss. In the second quarter of 2022, the Company terminated two additional interest rate swap derivative contracts designated as cash flow hedges of variable rate deposits with a total notional value of $500.0 million each effective since April 2020. The remaining terms of such derivative contracts were through March 2023 and April 2024 and, at the time of termination, the fair value of the derivative contracts totaled assets of $3.7 million and $10.7 million, respectively, with such adjustments to fair value recorded in accumulated other comprehensive income or loss. In the fourth quarter of 2022, the Company terminated one additional interest rate collar derivative contract designated as a cash flow hedge of the term facility with a total notional value of $64.3 million effective since September 2018. The remaining term of such derivative contract was through September 2023 and, at the time of termination, the fair value of the derivative contract totaled an asset of $875,000, with such adjustments to fair value recorded in accumulated other comprehensive income or loss.

For all such terminations, as the hedged forecasted transactions (interest payments on variable rate deposits and the term facility) are still expected to occur over the remaining term of such terminated derivatives, such adjustments will remain in accumulated other comprehensive income or loss and be reclassified as a reduction to interest expense on a straight-line basis over the original term of the terminated derivative contracts.


	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Unrealized (loss) gain at beginning of period	$	(61,739)	$	78,764	$	10,026	$	36,908
Amount reclassified from accumulated other comprehensive income or loss to interest income or expense on deposits, loans, and other borrowings	18,374		(5,451)		36,038		914
Amount of loss recognized in other comprehensive income or loss	(61,456)		(70,990)		(150,885)		(35,499)
Unrealized (loss) gain at end of period	$	(104,821)	$	2,323	$	(104,821)	$	2,323

As of September 30, 2023, the Company estimated that during the next 12 months $74.3 million will be reclassified from accumulated other comprehensive income or loss as a decrease to net interest income. Such estimate consists of $16.0 million reclassified as a reduction to interest expense on the terminated cash flow hedges discussed above and $90.3 million reclassified as a reduction to interest income related to the interest rate collars and swaps noted above that remain outstanding.

Interest rate swaps designated as fair value hedges involve the payment of fixed amounts to a counterparty in exchange for the Company receiving variable payments over the life of the agreements without the exchange of the underlying notional amount. As of September 30, 2023, the Company had 14 interest rate swaps with an aggregate notional amount of $217.5 million that were designated as fair value hedges primarily associated with fixed rate commercial and industrial and commercial real estate loans as well as life insurance premium finance receivables.

For derivatives designated and that qualify as fair value hedges, the net gain or loss from the entire change in the fair value of the derivative instrument is recognized in the same income statement line item as the earnings effect, including the net gain or loss, of the hedged item (interest income earned on fixed rate loans) when the hedged item affects earnings.


(In thousands)		September 30, 2023
Derivatives in Fair Value Hedging Relationships	Location in the Statement of Condition	Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/(Liabilities) for which Hedge Accounting has been Discontinued
Interest rate swaps	Loans, net of unearned income	$	198,833	$	(17,832)	$	(88)
	Available-for-sale debt securities	767		(29)		—

Interest Rate Derivatives—Periodically, the Company may purchase interest rate cap derivatives designed to act as an economic hedge of the risk of the negative impact on its fixed-rate loan portfolios from rising interest rates. As of September 30, 2023, there were no interest rate caps outstanding that were designed to act as an economic hedge. During 2022, the Company terminated an interest rate cap derivative contract related to LIBOR that was not designated as an accounting hedge with a total notional value of $1.0 billion.

Additionally, the Company has interest rate derivatives, including swaps and option products, resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products (typically interest rate swaps) directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively convert a variable rate loan to a fixed rate. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At September 30, 2023 and December 31, 2022, the Company had interest rate derivative transactions with an aggregate notional amount of approximately $10.7 billion and $9.6 billion, respectively, (all interest rate swaps and caps with customers and third parties) related to this program. At September 30, 2023 these interest rate derivatives had maturity dates ranging from October 2023 to January 2037.

Mortgage Banking Derivatives—These derivatives include interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. It is the Company’s practice to enter into forward commitments for the future delivery of a portion of its residential mortgage loan production when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company’s mortgage banking derivatives have not been designated as being in hedge relationships. At September 30, 2023 and December 31, 2022, the Company had interest rate lock commitments with an aggregate notional amount of approximately $181.5 million and $121.6 million, and forward commitments to sell mortgage loans with an aggregate notional amount of approximately $476.5 million and $321.0 million, respectively. The fair values of these derivatives were estimated based on changes in mortgage rates from the dates of the commitments. Changes in the fair value of these mortgage banking derivatives are included in mortgage banking revenue.

Commodity Derivatives—The Company has commodity forward contracts resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively purchase or sell a given commodity at an agreed-upon price on an agreed-upon settlement date. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At September 30, 2023 and December 31, 2022, the Company had commodity derivative transactions with an aggregate notional amount of approximately $9.1 million and $3.6 million, respectively, (all forward contracts with customers and third parties) related to this program. At September 30, 2023, these commodity derivatives had maturity dates ranging from October 2023 to January 2024.

Foreign Currency Derivatives—The Company has foreign currency derivative contracts resulting from a service the Company provides to certain qualified customers. The Company’s banking subsidiaries execute certain derivative products directly with qualified customers to facilitate their respective risk management strategies related to foreign currency fluctuations. For example, these arrangements allow the Company’s customers to effectively exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. As of September 30, 2023 and December 31,

Other Derivatives—Periodically, the Company will sell options to a bank or dealer for the right to purchase certain securities held within the banks’ investment portfolios (covered call options). These option transactions are designed to increase the total return associated with the investment securities portfolio. These options do not qualify as accounting hedges pursuant to ASC 815 and, accordingly, changes in the fair value of these contracts are recognized as other non-interest income. There were no covered call options outstanding as of September 30, 2023, December 31, 2022 or September 30, 2022.

Periodically, the Company will purchase options for the right to purchase securities not currently held within the banks’ investment portfolios or enter into interest rate swaps in which the Company elects to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to the Company's mortgage servicing rights portfolio. The gain or loss associated with these derivative contracts are included in mortgage banking revenue. The Company held four interest rate derivatives with an aggregate notional value of $215.0 million at September 30, 2023 and three interest rate derivatives with an aggregate notional value of and $190.0 million at December 31, 2022, for such purpose of economically hedging a portion of the fair value adjustment related to its mortgage servicing rights portfolio.


(In thousands)		Three Months Ended				Nine Months Ended
Derivative	Location in income statement	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Interest rate swaps and caps	Trading gains (losses), net	$	778	$	(54)	$	1,590	$	4,131
Mortgage banking derivatives	Mortgage banking revenue	1,428		(11,236)		9,859		(26,155)
Commodity contracts	Trading gains (losses), net	23		—		243		—
Foreign exchange contracts	Trading gains (losses), net	—		—		—		—
Covered call options	Fees from covered call options	4,215		1,366		17,184		6,177
Derivative contract held as economic hedge on MSRs	Mortgage banking revenue	(2,481)		(2,318)		(2,261)		(2,318)

Derivative instruments have inherent risks, primarily market risk and credit risk. Market risk is associated with changes in interest rates and credit risk relates to the risk that the counterparty will fail to perform according to the terms of the agreement. The amounts potentially subject to market and credit risks are the streams of interest payments under the contracts and the market value of the derivative instrument and not the notional principal amounts used to express the volume of the transactions. Market and credit risks are managed and monitored as part of the Company’s overall asset-liability management process, except that the credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company’s standard loan underwriting process since these derivatives are secured through collateral provided by the loan agreements. Actual exposures are monitored against various types of credit limits established to contain risk within parameters. When deemed necessary, appropriate types and amounts of collateral are obtained to minimize credit exposure.

The Company has agreements with certain of its interest rate derivative counterparties that contain cross-default provisions, which provide that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain of its derivative counterparties that contain a provision allowing the counterparty to terminate the derivative positions if the Company fails to maintain its status as a well or adequately capitalized institution, which would require the Company to settle its obligations under the agreements. As of September 30, 2023, there were $5.5 million of interest rate derivatives in a net liability position that were subject to such agreements. The fair value of such derivatives includes accrued interest related to these agreements. If the Company had breached any of these provisions and the derivatives were terminated as a result, the Company would have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty.

standard underwriting process applicable to loans since these derivatives are secured through collateral provided by the loan agreement. The counterparty risk associated with the mirror-image swaps executed with third parties is monitored and managed in connection with the Company’s overall asset liability management process.

The Company records interest rate derivatives subject to master netting agreements at their gross value and does not offset derivative assets and liabilities on the Consolidated Statements of Condition. The table below summarizes the Company’s interest rate derivatives and offsetting positions as of the dates shown.


	Derivative Assets						Derivative Liabilities
	Fair Value						Fair Value
(In thousands)	September 30, 2023		December 31, 2022		September 30, 2022		September 30, 2023		December 31, 2022		September 30, 2022
Gross Amounts Recognized	$	312,253	$	286,438	$	299,298	$	453,271	$	329,307	$	353,426
Less: Amounts offset in the Statements of Condition	—		—		—		—		—		—
Net amount presented in the Statements of Condition	$	312,253	$	286,438	$	299,298	$	453,271	$	329,307	$	353,426
Gross amounts not offset in the Statements of Condition
Offsetting Derivative Positions	(157,673)		(64,100)		(74,101)		(157,673)		(64,100)		(74,101)
Collateral Posted	(140,857)		(194,666)		(204,260)		(3,785)		—		—
Net Credit Exposure	$	13,723	$	27,672	$	20,937	$	291,813	$	265,207	$	279,325