Derivatives

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Back-to-Back Swaps

The Company offers interest rate swaps when requested by customers to allow them to hedge the risk of rising interest rates on their variable rate loans. Upon entering into these swaps, the Company enters into offsetting positions with counterparties in order to minimize the interest rate risk. These back-to-back swaps are freestanding financial derivatives with the fair values reported in Other Assets and 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 the arrangements for financial statement presentation purposes. Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest income.

Interest Rate Floors Designated as Cash Flow Hedges

The Company entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans, which matured in the fourth quarter of 2023. The Company considered these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates and had designated them as cash flow hedges. Therefore, changes in the fair value of these derivative instruments were recognized in other comprehensive income. Amortization of the premium paid on cash flow hedges is recognized in earnings over the term of the hedge in the same caption as the hedged item. For the year ended December 31,

2023, the Company recognized a nominal amount through other comprehensive income and reclassified $0.5 million out of accumulated other comprehensive income into interest income. For the year ended December 31, 2022, the Company recognized $0.3 million through other comprehensive income and reclassified $0.4 million, respectively, out of accumulated other comprehensive income into interest income.

Interest Rate Swaps Designated as Fair Value Hedges

The Company entered into interest rate swap contracts to hedge the risk of changes in fair value of the AFS portfolio due to changes in the Secured Overnight Financing Rate ("SOFR"). The Company considers these derivatives to be highly effective at offsetting changes in interest rates and will assess the effectiveness on a quarterly basis. The changes in interest rates affecting the fair value of these derivative contracts are recognized in other comprehensive income. These derivative instruments are primarily for risk management purposes. For the year ended December 31, 2023, the Company recognized gains through other comprehensive income of $2.6 million and reclassified gains of $35 thousand, out of accumulated other comprehensive income into interest income.

The Company entered into interest rate swap contracts to hedge the risk of changes in the fair value of a pool of residential mortgages due to changes in SOFR. These fair values hedges utilize the portfolio layer method. The Company considers these derivatives to be highly effective at offsetting changes in interest rates and will assess the effectiveness on a quarterly basis. The changes in interest rates affecting the fair value of these derivative contracts are recognized in interest income. These derivative instruments are primarily for risk management purposes. For the year ended December 31, 2023, the Company recognized gains through interest income of $16 thousand.


(In thousands)	Notional Amount		Fair Value		Balance Sheet Category
December 31, 2023
Back-to-back swaps1	$	605,735	$	28,804	Other Assets and Other Liabilities

Securities fair value hedges	400,000		2,677		Other Assets
Residential mortgage fair value hedges	200,000		75		Other Liabilities

December 31, 2022
Back-to-back swaps1	$	312,808	$	23,140	Other Assets and Other Liabilities
Interest rate floors	300,000		2		Other Assets
1Back-to-back swaps include risk participation agreements with notional amounts of $9.4 million and nominal fair value.

The following table presents amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges.


	Carrying amount of the hedged items at December 31,				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items at December 31,

(In thousands)	2023		2022		2023		2022
Securities available-for-sale 1	$	584,108	$	—	$	2,643	$	—
Loans, net 2	633,693		—		44		—
1 At December 31, 2023, and December 31, 2022, the amortized cost basis and unallocated basis adjustments used in hedging relationships was $680.6 million and $0, respectively. Refer to Note 3 for a reconciliation of the amortized cost and fair value of available-for-sale securities.
2 These amounts represent the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At December 31, 2023, and December 31, 2022, the portfolio layer method was $200 million and $0, respectively, of which $200 million and $0, respectively, was designated as hedged..