DERIVATIVES

6 Months Ended

Jun. 30, 2024

DERIVATIVES

DERIVATIVES

NOTE 13 — DERIVATIVES

On occasion, the Company enters into derivative contracts as a part of its asset liability management strategy to help manage its interest rate risk position. At June 30, 2024, these derivatives had a notional amount of $550.0 million and contractual maturities ranging from August 1, 2025 to March 23, 2026. The notional amount of the derivatives does not represent the amount exchanged by the parties. The derivatives were designated as cash flow hedges of certain deposit liabilities and borrowings of the Company. The hedges were determined to be highly effective during the three and six months ended June 30, 2024. The Company expects the hedges to remain highly effective during the remaining term of the derivatives.

In addition, the Company periodically enters into certain commercial loan interest rate swap agreements to provide commercial loan clients the ability to convert loans from variable to fixed interest rates. Under these agreements, the Company enters into a variable-rate loan agreement with a client in addition to a swap agreement. This swap agreement effectively converts the client’s variable rate loan into a fixed rate loan. The Company then enters into a corresponding swap agreement with a third party to offset its exposure on the variable and fixed components of the client agreement. As the interest rate swap agreements with the clients and third parties are not designated as hedges, the instruments are marked to market in earnings. At June 30, 2024, these interest rate swaps have a notional amount of $69.0 million and a contractual maturity of August 15, 2028.

The following tables reflect the derivatives recorded on the balance sheet (in thousands):

			Fair Value
		Notional		Other		Other
		Amount		Assets		Liabilities
At June 30, 2024
Derivatives designated as hedges:
Interest rate swaps related to client deposits and borrowings	$	550,000	$	3,999	$	329
Derivatives not designated as hedges:
Interest rate swaps	$	69,000	$	267	$	267
At December 31, 2023
Derivatives designated as hedges:
Interest rate swaps related to client deposits and borrowings	$	700,000	$	1,530	$	4,880
Derivatives not designated as hedges:
Interest rate swaps	$	69,000	$	1,157	$	1,157

The effect of cash flow hedge accounting on accumulated other comprehensive income is as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Interest rate swaps and caps related to client deposits and borrowings
Amount of gain (loss) recognized in OCI, net of tax	$	656	$	4,702	$	4,935	$	4,007
Amount of gain (loss) reclassified from OCI into income	$	1,262	$	1,218	$	2,513	$	2,453
Location of gain (loss) reclassified from OCI into income		Licensing fees		Licensing fees		Licensing fees		Licensing fees