Derivative Financial Instruments

3 Months Ended

Mar. 31, 2023

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Note 11. Derivative Financial Instruments

The notional amount and fair value of the Company’s derivative financial instruments as of March 31, 2023, and December 31, 2022, were as follows:


	March 31, 2023					December 31, 2022
(dollars in thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest Rate Lock Commitments	$	6,748	$	17		$	3,860	$	58
Forward Commitments		6,757		(19	)		3,256		6
Interest Rate Swap Agreements
Receive Fixed/Pay Variable Swaps		1,879,140		(118,554	)		1,821,433		(160,914	)
Pay Fixed/Receive Variable Swaps		1,879,140		65,542			1,821,433		38,785
Foreign Exchange Contracts		24,789		201			52,065		1,745
Conversion Rate Swap Agreement 1		135,380	NA				124,752	NA

The conversation rate swap agreements were valued at zero as further reductions to the conversion rate were deemed neither probable nor reasonable estimable.

The following table presents the Company’s derivative financial instruments, their fair values, and their location in the consolidated statements of condition as of March 31, 2023, and December 31, 2022:


Derivative Financial Instruments	March 31, 2023				December 31, 2022
Not Designated as Hedging Instruments 1	Asset		Liability		Asset		Liability
(dollars in thousands)	Derivatives		Derivatives		Derivatives		Derivatives
Interest Rate Lock Commitments	$	174	$	—	$	64	$	6
Forward Commitments		5		24		10		4
Interest Rate Swap Agreements		84,666		137,678		45,831		167,960
Foreign Exchange Contracts		205		4		1,812		67
Total	$	85,050	$	137,706	$	47,717	$	168,037

Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the consolidated statements of condition. The Company’s free-standing derivative financial instruments are required to be carried at their fair value on the Company’s consolidated statements of condition.

The following table presents the Company’s derivative financial instruments and the amount and location of the net gains or losses recognized in the consolidated statements of income for the three months ended March 31, 2023, and March 31, 2022:


	Location of
Derivative Financial Instruments	Net Gains (Losses)	Three Months Ended
Not Designated as Hedging Instruments	Recognized in the	March 31,
(dollars in thousands)	Statements of Income	2023			2022
Interest Rate Lock Commitments	Mortgage Banking	$	204		$	(1,079	)
Forward Commitments	Mortgage Banking		(31	)		1,908
Interest Rate Swap Agreements 1	Other Noninterest Income		(16	)		(6	)
Foreign Exchange Contracts	Other Noninterest Income		841			274
Total		$	998		$	1,097

The net gains and losses presented in the table above have been updated to properly exclude the fee income generated from the execution of these derivative financial instruments.

As of March 31, 2023, and December 31, 2022, the Company did not designate any derivative financial instruments as formal hedging relationships.

Interest Rate Swap Agreements

The Company enters into interest rate swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. The Company mitigates the risk of entering into these agreements by entering into equal and offsetting interest rate swap agreements with highly rated third party financial institutions. The interest rate swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of condition (asset positions are included in other assets and liability positions are included in other liabilities). The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of marketable securities, is posted by the party (i.e., the Company or the financial institution counterparty) with net liability positions in accordance with contract thresholds. The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally-cleared variation margin rules. The Company had net asset positions with its financial institution counterparties totaling $65.5 million and $38.8 million as of March 31, 2023, and December 31, 2022, respectively.

Conversion Rate Swap Agreements

As certain sales of Visa Class B restricted shares were completed, the Company entered into a conversion rate swap agreement with the buyer that requires payment to the buyer in the event Visa further reduces the conversion ratio of Class B into Class A unrestricted common shares. In the event of Visa increasing the conversion ratio, the buyer would be required to make payment to the Company. As of March 31, 2023, and December 31, 2022, the conversion rate swap agreement was valued at zero (i.e., no contingent liability recorded) as further reductions to the conversion ratio were deemed neither probable nor reasonably estimable by management.