Derivatives

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

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 Swaps Designated as Fair Value Hedges

In the second quarter of 2023, the Company entered into interest rate swap contracts to hedge the risk of changes in fair value of the AFS securities 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 three months ended March 31, 2024, the Company recognized gains through other comprehensive income of $4.0 million and reclassified gains of $61 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 three months ended March 31, 2024, the Company recognized gains through interest income of $0.4 million.

(In thousands)	Notional Amount		Fair Value		Balance Sheet Category
March 31, 2024
Back-to-back swaps1	$	622,857	$	30,037	Other Assets and Other Liabilities
Securities fair value hedges	400,000		4,018		Other Assets
Residential mortgage fair value hedges	200,000		880		Other Assets
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
1Back-to-back swaps include risk participation agreements with notional amounts of $9.4 million and nominal fair value at March 31, 2024, and December 31, 2023, respectively.

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				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items
(In thousands)	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Securities available-for-sale 1	$	555,920	$	584,108	$	4,044	$	2,643
Loans, net 2	627,213		633,693		937		44
1 At March 31, 2024, and December 31, 2023, the amortized cost basis and unallocated basis adjustments used in hedging relationships was $657.5 million and $680.6 million, respectively. Refer to “Note 3 - Securities” for a reconciliation of the amortized cost and fair value of AFS 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 March 31, 2024 and December 31, 2023, the portfolio layer method was $200 million, of which $200 million was designated as hedged.