Derivatives

12 Months Ended

Dec. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Note 6 – Derivatives

Interest Rate Contracts

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

The Company has entered into interest rate swap contracts to hedge the risk of changes in fair value of the AFS securities portfolio due to changes in SOFR. The Company considers these derivatives to be highly effective at offsetting changes in interest rates and assesses the effectiveness on a quarterly basis. The effect of changes in interest rates on the fair value of these derivative contracts is recognized in other comprehensive income. These derivative instruments are primarily for risk management purposes. For the year ended December 31, 2024, the Company recognized, through other comprehensive income,

net losses of $2.7 million, and reclassified net gains of $0.4 million out of accumulated other comprehensive income into interest income. For the year ended December 31, 2023, the Company recognized net gains through other comprehensive income of $2.6 million and reclassified net gains of $35 thousand out of accumulated other comprehensive income into interest income.

The Company has 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 value hedges utilize the portfolio layer method. The Company considers these derivatives to be highly effective at offsetting changes in interest rates and assesses the effectiveness on a quarterly basis. The effect of changes in interest rates on the fair value of these derivative contracts is recognized in interest income. These derivative instruments are primarily for risk management purposes. For the years ended December 31, 2024 and December 31, 2023, the Company recognized gains through interest income of $2.3 million and $16 thousand, respectively.

(In thousands)	Notional Amount		Fair Value		Balance Sheet Category
December 31, 2024
Interest rate contracts1	$	910,640	$	28,184	Other Assets and Other Liabilities
Securities fair value hedges	400,000		436		Other Assets
Residential mortgage fair value hedges	400,000		121		Other Assets and Other Liabilities
December 31, 2023
Interest rate contracts1	$	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
1Interest rate contracts include risk participation agreements with notional amounts of $28.9 million and $9.4 million at December 31, 2024, and December 31, 2023, respectively with nominal fair value in both periods.

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)	2024		2023		2024		2023
Securities available-for-sale 1	$	460,126	$	584,108	$	35	$	2,643
Loans, net 2	596,632		633,693		283		44
1 At December 31, 2024, and December 31, 2023, the amortized cost basis and unallocated basis adjustments used in hedging relationships was $553.8 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 December 31, 2024, the portfolio layer method was $400 million, of which $400 million was designated as hedged. At December 31, 2023, the portfolio layer method was $200 million, of which $200 million was designated as hedged.