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Derivative financial instruments (Tables)
9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Information about Interest Rate Swap Agreements

Information about interest rate swap agreements entered into for interest rate risk management purposes summarized by type of financial instrument the swap agreements were intended to hedge follows:

 

 

 

 

 

 

 

 

Weighted-

 

 

Estimated

 

 

 

Notional

 

 

Average

 

 

Average Rate

 

 

Fair Value

 

 

 

Amount

 

 

Maturity

 

 

Fixed

 

 

Variable

 

 

Gain (Loss) (a)

 

 

 

(In thousands)

 

 

(In years)

 

 

 

 

 

 

 

 

(In thousands)

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate long-term borrowings (b)

 

$

2,000,000

 

 

 

6.6

 

 

 

3.11

%

 

 

5.74

%

 

$

3,108

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest payments on variable rate commercial real estate loans (b) (c)

 

 

23,977,000

 

 

 

2.0

 

 

 

3.45

%

 

 

5.32

%

 

 

9,077

 

Total

 

$

25,977,000

 

 

 

2.4

 

 

 

 

 

 

 

 

$

12,185

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate long-term borrowings (b)

 

$

1,500,000

 

 

 

3.3

 

 

 

2.98

%

 

 

4.52

%

 

$

(833

)

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest payments on variable rate commercial real estate loans (b) (d)

 

 

15,900,000

 

 

 

1.4

 

 

 

1.91

%

 

 

4.38

%

 

 

(7,059

)

Total

 

$

17,400,000

 

 

 

1.6

 

 

 

 

 

 

 

 

$

(7,892

)

 

(a)
Certain clearinghouse exchanges consider payments by counterparties for variation margin on derivative instruments to be settlements of those positions. The impact of such payments for interest rate swap agreements designated as fair value hedges was a net settlement of losses of $163.9 million at September 30, 2023 and $65.0 million at December 31, 2022. The impact of such payments on interest rate swap agreements designated as cash flow hedges was a net settlement of losses of $538.5 million at September 30, 2023 and $329.7 million at December 31, 2022.
(b)
Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and pays at a variable rate.
(c)
Includes notional amount and terms of $9.4 billion of forward-starting interest rate swap agreements that become effective in 2023 and 2024.
(d)
Includes notional amount and terms of $4.7 billion of forward-starting interest rate swap agreements that become effective in 2023.

10. Derivative financial instruments, continued

Information about Fair Values of Derivative Instruments in Consolidated Balance Sheet

Information about the fair values of derivative instruments in the Company’s Consolidated Balance Sheet and Consolidated Statement of Income follows:

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

 

Fair Value

 

 

Fair Value

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(In thousands)

 

Derivatives designated and qualifying as hedging instruments (a)

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements

 

$

12,471

 

 

$

1,202

 

 

$

286

 

 

$

9,094

 

Commitments to sell real estate loans

 

 

5,998

 

 

 

3,037

 

 

 

614

 

 

 

9

 

 

 

 

18,469

 

 

 

4,239

 

 

 

900

 

 

 

9,103

 

Derivatives not designated and qualifying as hedging instruments (a)

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage banking:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-related commitments to originate real estate loans for sale

 

 

2,380

 

 

 

452

 

 

 

53,783

 

 

 

46,025

 

Commitments to sell real estate loans

 

 

60,036

 

 

 

51,410

 

 

 

83

 

 

 

14

 

 

 

 

62,416

 

 

 

51,862

 

 

 

53,866

 

 

 

46,039

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (b)

 

 

323,865

 

 

 

355,806

 

 

 

1,420,668

 

 

 

1,278,180

 

Foreign exchange and other option and futures contracts

 

 

15,552

 

 

 

24,062

 

 

 

14,361

 

 

 

22,004

 

 

 

 

339,417

 

 

 

379,868

 

 

 

1,435,029

 

 

 

1,300,184

 

Total derivatives

 

$

420,302

 

 

$

435,969

 

 

$

1,489,795

 

 

$

1,355,326

 

 

(a)
Asset derivatives are reported in other assets and liability derivatives are reported in other liabilities.
(b)
The impact of variation margin payments at September 30, 2023 and December 31, 2022 was a reduction of the estimated fair value of interest rate contracts not designated as hedging instruments in an asset position of $1.2 billion and $1.1 billion, respectively, as of each period end, and in a liability position of $15.7 million and $29.2 million, respectively.

 

 

Carrying Amount of the Hedged Item

 

 

Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the Hedged Item

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(In thousands)

 

Location in the Consolidated Balance Sheet
   of the Hedged Items in Fair Value
Hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

1,834,030

 

 

$

1,433,731

 

 

$

(161,230

)

 

$

(65,310

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Information about Fair Values of Derivative Instruments in Consolidated Statement of Income

 

 

Amount of Gain (Loss) Recognized

 

 

 

Three Months Ended September 30

 

 

 

2023

 

 

2022

 

 

 

Derivative

 

 

Hedged Item

 

 

Derivative

 

 

Hedged Item

 

 

 

(In thousands)

 

Derivatives in fair value hedging relationships

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate long-term borrowings (a)

 

$

(60,605

)

 

 

60,737

 

 

$

(50,976

)

 

 

50,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (b)

 

$

6,311

 

 

 

 

 

$

6,946

 

 

 

 

Foreign exchange and other option and futures contracts (b)

 

 

4,232

 

 

 

 

 

 

4,462

 

 

 

 

Total

 

$

10,543

 

 

 

 

 

$

11,408

 

 

 

 

 

10. Derivative financial instruments, continued

 

 

Amount of Gain (Loss) Recognized

 

 

 

Nine Months Ended September 30

 

 

 

2023

 

 

2022

 

 

 

Derivative

 

 

Hedged Item

 

 

Derivative

 

 

Hedged Item

 

 

 

(In thousands)

 

Derivatives in fair value hedging relationships

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate long-term borrowings (a)

 

$

(94,997

)

 

 

95,920

 

 

$

(114,932

)

 

 

114,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (b)

 

$

25,027

 

 

 

 

 

$

17,907

 

 

 

 

Foreign exchange and other option and futures contracts (b)

 

 

11,377

 

 

 

 

 

 

10,701

 

 

 

 

Total

 

$

36,404

 

 

 

 

 

$

28,608

 

 

 

 

 

(a)
Reported as an adjustment to interest expense.
(b)
Reported as trading account and other non-hedging derivative gains.