Derivative Financial Instruments

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Banking Derivative Financial Instruments:

We are exposed to changes in the fair value of certain of our fixed-rate assets due to changes in benchmark interest rates. We use interest rate swaps to manage our exposure to changes in fair value on these instruments attributable to changes a designated benchmark interest rate, such as SOFR. Interest rate swaps designated as fair value hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. The carrying amount of hedged loans receivable and available-for-sale securities as of December 31, 2023 and 2022 was $184,829 and $181,377, respectively. The cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged loans receivable as of December 31, 2023 and 2022 was $(9,567) and $(12,752), respectively. The cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged available-for-sale securities as of December 31, 2023 and 2022 was $3,168 and $2,879, respectively. The hedges were determined to be effective during all periods presented and we expect the hedges to remain effective during their remaining terms.

Derivatives not designated as hedges are not speculative and result from a service we provide to certain customers. We execute interest rate swaps with banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that we execute with a third-party, such that we minimize our net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. These instruments are a component of prepaid expenses and other assets and accrued expenses and other liabilities.

The components of our banking derivative financial instruments consisted of the following as of December 31,:


	Number of Transactions	Expiration Dates	Outstanding Notional		Estimated Fair Value
2023
Derivative financial instruments designated as hedging instruments:
Assets:
Interest Rate Products	32	2028 - 2036	$	195,935	$	12,737


Derivative financial instruments not designated as hedging instruments:
Assets:
Interest Rate Products	49	2024 - 2037	$	396,111	$	19,931
Other	1	2025	$	14,638	$	7
Liabilities:
Interest Rate Products	49	2024 - 2037	$	396,111	$	19,869
Other	2	2028	$	6,168	$	30
2022
Derivative financial instruments designated as hedging instruments:
Assets:
Interest Rate Products	32	2028-2036	$	201,906	$	15,636


Derivative financial instruments not designated as hedging instruments:
Assets:
Interest Rate Products	41	2024-2037	$	338,770	$	24,615
Other	1	2025	$	14,638	$	—
Liabilities:
Interest Rate Products	41	2024-2037	$	338,770	$	24,242

We recorded gains and losses on banking derivatives assets as follows for the years ended December 31,:


	2023		2022		2021
Recorded gain (loss) on banking derivative assets	$	4,482	$	28,783	$	(777)
Recorded (loss) gain on banking derivative liabilities	$	(4,820)	$	(27,973)	$	1,172

For the years ended December 31, 2023, 2022 and 2021 our banking derivative financial instruments not designated as hedging instruments generated fee income of $1,451, $2,152 and $2,309, respectively.

Credit-risk-related Contingent Features:

We have agreements with each of our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations.

We also have agreements with our derivative counterparties that contain a provision where if we fail to maintain our status as a well-capitalized institution, then our derivative counterparties have the right, but not the obligation to terminate existing swaps. As of December 31, 2023 and 2022, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $20,508 and $24,677, respectively. As of December 31, 2023 and 2022, we have minimum collateral posting thresholds with our derivative counterparties and have posted collateral of $9,040 and $8,790, respectively. If we had breached any of these provisions at December 31, 2023, we could have been required to settle our obligations under the agreements at their termination value of $20,508.

Mortgage Banking Derivative Financial Instruments:

The components of our mortgage banking derivative financial instruments consisted of the following as of December 31,:


	Expiration Dates	Outstanding Notional		Estimated Fair Value
2023
Derivative financial instruments
Assets:
Futures	2024	$	28,700	$	2,153
Interest rate lock commitments (IRLC)	2024	$	41,404	$	252

Liabilities:
Forward MBS trades	2024	$	77,000	$	606


2022
Derivative financial instruments
Assets:
Futures	2023	$	85,000	$	36


Liabilities:
Forward MBS trades	2023	$	21,800	$	225

Interest rate lock commitments (IRLC)	2023	$	52,533	$	60

We recorded gains and losses on mortgage banking derivatives assets as follows for the years ended December 31,:


	2023		2022		2021
Recorded (loss) gain on mortgage banking derivative assets	$	(857)	$	233	$	(9,655)
Recorded (loss) gain on mortgage banking derivative liabilities	$	(642)	$	(15,863)	$	246