DERIVATIVES

3 Months Ended

Mar. 31, 2023

DERIVATIVES

DERIVATIVES

NOTE 13 — DERIVATIVES

In the first quarter of 2023, the Company entered into an interest rate swap derivative contract (“interest rate swap”) as a part of its asset liability management strategy to help manage its interest rate risk position. The interest rate swap has a notional amount of $400.0 million and a contractual maturity of August 1, 2025. The notional amount of the interest rate swap does not represent the amount exchanged by the parties. The interest rate swap was designated as a cash flow hedge of certain deposit liabilities of the Company. The hedge was determined to be highly effective during the three months ended March 31, 2023. The Company expects the hedge to remain highly effective during the remaining term of the interest rate swap.

In 2020, the Company entered into an interest rate cap derivative contract (“interest rate cap”) as a part of its asset liability management strategy to help manage its interest rate risk position. The interest rate cap had a notional amount of $300.0 million and a contractual maturity of March 1, 2025. The notional amount of the interest rate cap does not represent the amount exchanged by the parties. The amount exchanged was determined by reference to the notional amount and the other terms of the interest rate cap. The interest rate subject to the cap was 30-day LIBOR.

The interest rate cap was designated as a cash flow hedge of certain deposit liabilities of the Company. The hedge was determined to be highly effective during 2022 until it was terminated in the third quarter of 2022. The unrecognized value of $12.7 million at termination will be released from Accumulated Other Comprehensive Income and recorded as a credit to Licensing fees expense through March 2025.

The following tables reflect the derivatives recorded on the balance sheet (in thousands):

				Fair
				Value
		Notional		Asset /
		Amount		(Liability)
At March 31, 2023
Derivatives designated as hedges:
Interest rate swap related to customer deposits	$	400,000	$	(1,006)
Total included in Other Assets	$	400,000	$	(1,006)
At December 31, 2022
Derivatives designated as hedges:
Interest rate cap related to customer deposits	$	—	$	—
Total included in Other Assets	$	—	$	—

The effect of cash flow hedge accounting on accumulated other comprehensive income is as follows (in thousands):

	Three months ended March 31,
	2023		2022
Interest rate caps related to customer deposits
Amount of gain (loss) recognized in OCI, net of tax	$	(699)	$	6,087
Amount of gain (loss) reclassified from OCI into income	$	1,235	$	—
Location of gain (loss) reclassified from OCI into income		Licensing fees		N/A

N/A - not applicable