DERIVATIVES

12 Months Ended

Dec. 31, 2023

DERIVATIVES

DERIVATIVES

NOTE 21 – DERIVATIVES

On occasion, the Company enters into derivative contracts as a part of its asset liability management strategy to help manage its interest rate risk position. At December 31, 2023, these derivatives had a notional amount of $700.0 million and contractual maturities ranging from August 1, 2025 to September 23, 2025. The notional amount of the derivatives does not represent the amount exchanged by the parties. The derivatives were designated as cash flow hedges of certain deposit liabilities and borrowings of the Company. The hedges were determined to be highly effective during the year ended December 31, 2023. The Company expects the hedges to remain highly effective during the remaining term of the derivatives.

In addition, the Company periodically enters into certain commercial loan interest rate swap agreements to provide commercial loan customers the ability to convert loans from variable to fixed interest rates. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to a swap agreement. This swap agreement effectively converts the customer’s variable rate loan into a fixed rate loan. The Company then enters into a corresponding swap agreement with a third party to offset its exposure on the variable and fixed components of the customer agreement. As the interest rate swap agreements with the customers and third parties are not designated as hedges, the instruments are marked to market in earnings. At December 31, 2023, these interest rate swaps have a notional amount of $69.0 million and a contractual maturity of August 15, 2028.

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

			Fair Value
		Notional		Other		Other
		Amount		Assets		Liabilities
At December 31, 2023
Derivatives designated as hedges:
Interest rate swaps related to customer deposits and borrowings	$	700,000	$	1,530	$	4,880
Derivatives not designated as hedges:
Interest rate swaps	$	69,000	$	1,157	$	1,157
At December 31, 2022
Derivatives designated as hedges:
Interest rate cap related to customer deposits	$	—	$	—	$	—

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

	Year ended December 31,
	2023		2022		2021
Interest rate swaps and caps related to customer deposits and borrowings
Amount of gain (loss) recognized in OCI, net of tax	$	(2,355)	$	6,787	$	(1,311)
Amount of gain (loss) reclassified from OCI into income	$	4,864	$	1,949	$	—
Location of gain (loss) reclassified from OCI into income		Licensing fees		N/A		N/A