The Company uses derivative financial instruments to manage its interest rate risk resulting from the differences in the amount, timing, and duration of known or expected cash receipts and known or expected cash payments. Additionally, the Company enters into interest rate derivatives and foreign exchange contracts to accommodate the business requirements of its customers (“customer-related positions”) and risk participation agreements entered into as financial guarantees of performance on customer-related interest rate swap derivatives. The Company also enters into residential mortgage loan commitments to fund mortgage loans at specified rates and times in the future and enters into forward sale commitments to sell such residential mortgage loans at specified prices and times in the future, both of which are considered derivative instruments. Derivative instruments are carried at fair value in the Company’s Consolidated Financial Statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not the instrument qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship.

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty plus any initial margin collateral posted. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote. The Company’s discounting methodology and interest calculation of cash margin uses the Secured Overnight Financing Rate, or SOFR, for U.S. dollar cleared interest rate swaps.

An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The Company has entered into interest rate swaps in which it pays floating and receives fixed interest in order to manage its interest rate risk exposure to the variability in interest cash flows on certain floating-rate loans. Such interest rate swaps include those which effectively convert the floating rate one-month SOFR or overnight indexed swap rate, or prime rate interest payments received on the loans to a fixed rate and consequently reduce the Company’s exposure to variability in short-term interest rates. For interest rate swaps that are accounted for as cash flow hedges, changes in fair value are included in other comprehensive income and reclassified into net income in the same period or periods during which the hedged forecasted transaction affects net income. The following tables reflect the Company’s derivative positions for interest rate swaps which qualify as cash flow hedges for accounting purposes as of the dates indicated:


As of March 31, 2025
				Weighted Average Rate
	Notional Amount		Weighted Average Maturity	Current Rate Paid		Receive Fixed Swap Rate		Fair Value (1)
	(In thousands)		(In Years)					(In thousands)
Interest rate swaps on loans	$	2,400,000	2.32	4.33	%	3.02	%	$	400
Total	$	2,400,000						$	400

(1)The fair value included a net accrued interest payable balance of $1.5 million as of March 31, 2025. In addition, the fair value includes netting adjustments which represent the amounts recorded to convert derivative assets and liabilities cleared through the Chicago Mercantile Exchange, or CME, from a gross basis to a net basis in accordance with applicable accounting guidance.


As of December 31, 2024
				Weighted Average Rate
	Notional Amount		Weighted Average Maturity	Current Rate Paid		Receive Fixed Swap Rate		Fair Value (1)
	(In thousands)		(In Years)					(In thousands)
Interest rate swaps on loans	$	2,400,000	2.57	4.51	%	3.02	%	$	220
Total	$	2,400,000						$	220

(1)The fair value included a net accrued interest payable balance of $1.6 million as of December 31, 2024. In addition, the fair value includes netting adjustments which represent the amounts recorded to convert derivative assets and liabilities cleared through the CME from a gross basis to a net basis in accordance with applicable accounting guidance.

The Company expects approximately $19.2 million will be reclassified into interest income, as a reduction of such income, from other comprehensive income related to the Company’s active cash flow hedges in the next 12 months as of March 31, 2025. The reclassification is due to anticipated net payments on the swaps based upon the forward curve as of March 31, 2025.

Interest rate swaps offered to commercial customers do not qualify as hedges for accounting purposes. These swaps allow the Company to retain variable rate commercial loans while allowing the commercial customer to synthetically fix the loan rate by entering into a variable-to-fixed rate interest rate swap. The Company believes that its exposure to commercial customer derivatives is limited to non-performance by either the customer or the dealer because these contracts are simultaneously matched at inception with an offsetting transaction.

Risk participation agreements are entered into as financial guarantees of performance on interest rate swap derivatives. The purchased (asset) or sold (liability) guarantee allow the Company to participate-out (fee paid) or participate-in (fee received) the risk associated with certain derivative positions executed with the borrower by the lead bank in a customer-related interest rate swap derivative.

Foreign exchange contracts consist of those offered to commercial customers and those entered into to hedge the Company’s foreign currency risk associated with a foreign-currency loan. Neither qualifies as a hedge for accounting purposes. These commercial customer derivatives are offset with matching derivatives with correspondent-bank counterparties in order to minimize foreign exchange rate risk to the Company. Exposure with respect to these derivatives is largely limited to non-performance by either the customer or the other counterparty. Neither the Company nor the correspondent-bank counterparty are required to post collateral but each has established foreign-currency transaction limits to manage the exposure risk. The Company requires its customers to post collateral to minimize risk exposure.


	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	Fair Value at March 31, 2025		Fair Value at December 31, 2024		Balance Sheet Location	Fair Value at March 31, 2025		Fair Value at December 31, 2024
	(In thousands)
Derivatives designated as hedging instruments
Interest rate swaps	Other assets	$	404	$	225	Other liabilities	$	4	$	5
Derivatives not designated as hedging instruments
Customer-related positions:
Interest rate swaps	Other assets	$	46,885	$	57,526	Other liabilities	$	77,803	$	97,594
Risk participation agreements	Other assets	6		4		Other liabilities	6		4
Foreign currency exchange contracts - matched customer book	Other assets	910		1,990		Other liabilities	956		1,980
Foreign currency exchange contracts - foreign currency loan	Other assets	10		62		Other liabilities	34		—
		$	47,811	$	59,582		$	78,799	$	99,578
Total		$	48,215	$	59,807		$	78,803	$	99,583

The table below presents the net effect of the Company’s derivative financial instruments on the Consolidated Income Statements as well as the effect of the Company’s derivative financial instruments included in other comprehensive income (“OCI”) as follows:


	Three Months Ended March 31,
	2025		2024
	(In thousands)
Derivatives designated as hedges:
Gain (loss) in OCI on derivatives	$	6,405	$	(39,555)
Loss reclassified from OCI into interest income (effective portion)	$	(7,933)	$	(14,041)
Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)
Interest income	—		—
Other income	—		—
Total	$	—	$	—
Derivatives not designated as hedges:
Customer-related positions:
(Loss) gain recognized in interest rate swap income	$	(72)	$	135
Loss recognized in interest rate swap income for risk participation agreements	—		(42)
(Loss) gain recognized in other income for foreign currency exchange contracts:
Matched commercial customer book	(56)		50
Foreign currency loan	(86)		222
Net (loss) gain for derivatives not designated as hedges	$	(214)	$	365

The Company has agreements with its customer-related interest rate swap derivative counterparties that contain a provision whereby 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 customer-related interest rate swap derivative correspondent-bank counterparties that contain a provision whereby if the Company fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

Cleared derivative transactions are with the Chicago Mercantile Exchange, or CME, and exposure is settled to market daily, with additional credit exposure related to initial-margin collateral pledged to CME at trade execution. At both March 31, 2025 and December 31, 2024, the Company had exposure to CME for settled variation margin in excess of the customer-related and non-customer-related interest rate swap termination values of approximately $0.1 million. In addition, at March 31, 2025 and December 31, 2024, the Company had posted initial-margin collateral in the form of U.S. Treasury notes amounting to $90.1 million and $88.0 million, respectively, to CME for these derivatives. The U.S. Treasury notes were considered restricted assets and were included in available for sale securities within the Company’s Consolidated Balance Sheets.

At both March 31, 2025 and December 31, 2024, there were no customer-related interest rate swap derivatives with credit-risk contingent features in a net liability position. The Company has minimum collateral posting thresholds with its customer-related interest rate swap derivative correspondent-bank counterparties to the extent that the Company has a liability position with the correspondent-bank counterparties. The Company was not required to post cash collateral for interest rate swaps with correspondent-bank counterparties as of either March 31, 2025 or December 31, 2024. If the Company had breached any of these provisions at March 31, 2025 or December 31, 2024, it would have been required to settle its obligations under the agreements at the termination value. In addition, the Company had cross-default provisions with its commercial customer loan agreements which provide cross-collateralization with the customer loan collateral.

The Company enters into residential mortgage loan commitments in connection with its consumer mortgage banking activities to fund mortgage loans at specified rates and times in the future. In addition, the Company enters into forward sale commitments to sell such residential mortgage loans at specified prices and times in the future. These commitments are short-term in nature and generally expire in 30 to 60 days. The residential mortgage loan commitments that relate to the origination of mortgage loans that will be held for sale and the related forward sale commitments are considered

derivative instruments under ASC Topic 815, “Derivatives and Hedging” and are reported at fair value. Changes in fair value are reported in earnings and included in other non-interest income on the Consolidated Statements of Income. As of March 31, 2025 and December 31, 2024, the Company had an outstanding notional balance of residential mortgage loan origination commitments of $9.9 million and $15.7 million, respectively, and forward sale commitments of $7.1 million and $6.4 million, respectively. During both the three months ended March 31, 2025 and 2024, net gains/losses recorded by the Company related to the change in fair value of commitments to originate and sell mortgage loans were not significant. In addition, the aggregate fair value of the Company’s mortgage banking derivative asset and liability as of March 31, 2025 and December 31, 2024 was not significant. Mortgage banking derivative assets and liabilities are included in other assets and other liabilities, respectively, on the Consolidated Balance Sheets. Residential mortgages sold are generally sold with servicing rights released. Mortgage banking derivatives do not qualify as hedges for accounting purposes.