Derivative Financial Instruments

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheets, we may enter into derivative contracts. We account for our derivative contracts, including loan purchase commitments ("LPCs") and interest rate lock commitments ("IRLCs") qualifying as derivatives under GAAP, at fair value. As discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At September 30, 2024, we assessed this risk as remote and did not record an associated specific valuation adjustment. At September 30, 2024, we were in compliance with our derivative counterparty ISDA agreements.

The following table presents the fair value and notional amount of our derivatives at September 30, 2024 and December 31, 2023.

Table 12.1 – Fair Value and Notional Amount of Derivatives


	September 30, 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	195		125,000		952		385,000
Interest rate futures	5,622		715,900		—		—

Swaptions	70,151		6,295,000		—		—

Assets - Other Derivatives
LPCs and IRLCs	2,965		638,536		11,518		216,194

Total Assets(1)	$	78,933	$	7,774,436	$	14,212	$	651,194



Liabilities - Risk Management Derivatives

TBAs	$	—	$	—	$	(27,020)	$	1,405,000
Interest rate futures	(4,143)		1,076,400		(3,394)		141,500
Liabilities - Other Derivatives
Loan purchase commitments	(3,834)		701,770		(3,414)		430,983

Total Liabilities(1)	$	(7,977)	$	1,778,170	$	(33,828)	$	1,977,483
Total Derivatives, Net (1)	$	70,956	$	9,552,606	$	(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 three and nine months ended September 30, 2024.

Table 12.2 – Market Valuation Gains (Losses) on Derivatives


	Three Months Ended September 30, 2024		Nine Months Ended September 30, 2024
(In Thousands)
Risk Management Derivatives (1)	$	27,419	$	27,556

LPCs and IRLCs (2)	9,801		11,331



Market Valuation Gains (Losses) on Derivatives	$	37,220	$	38,887

(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.

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 $65 million and $68 million at September 30, 2024 and December 31, 2023, 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, 2024 and 2023, we reclassified $1 million and $3 million of realized net losses from Accumulated other comprehensive loss into Interest expense, respectively. As of September 30, 2024, we expect to amortize $4 million of realized losses related to terminated cash flow hedges into interest expense over the next twelve months.