Derivative Financial Instruments

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS

The following table presents a summary of notional amounts and fair values of derivative financial instruments as of December 31:


	2023				2022
	Notional Amount		Asset (Liability) Fair Value		Notional Amount		Asset (Liability) Fair Value
	(dollars in thousands)
Interest Rate Locks with Customers
Positive fair values	$	119,558	$	460	$	70,836	$	182
Negative fair values	1,015		(2)		4,939		(51)
Forward Commitments
Positive fair values	—		—		—		—
Negative fair values	42,000		(854)		10,000		(147)
Interest Rate Derivatives with Customers
Positive fair values	824,659		22,656		171,317		3,337
Negative fair values	3,784,236		(222,530)		3,802,480		(280,401)
Interest Rate Derivatives with Dealer Counterparties(1)
Positive fair values	3,784,236		128,235		3,802,480		161,956
Negative fair values	824,659		(23,023)		171,317		(3,703)
Interest Rate Derivatives used in Cash Flow Hedges(1)
Positive fair values	2,500,000		6,189		600,000		1,321
Negative fair values	750,000		—		1,000,000		(12,163)
Foreign Exchange Contracts with Customers
Positive fair values	4,159		40		11,123		571
Negative fair values	13,353		(446)		3,672		(85)
Foreign Exchange Contracts with Correspondent Banks
Positive fair values	15,969		532		4,887		101
Negative fair values	6,112		(31)		8,280		(499)

(1) Fair values are net of a valuation allowance of $366.3 thousand as of December 31, 2023 and 2022.

In the third quarter of 2023, the Corporation recorded a $3.0 million reduction to other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR. For the year ended December 31, 2023, the full-year reduction to other non-interest income related to the transition from LIBOR to SOFR was $1.9 million.

The following table presents the effect of cash flow hedge accounting on AOCI for the year ended December 31, 2023 and 2022:


	Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Recognized in OCI Included Component		Amount of Gain (Loss) Recognized in OCI Excluded Component		Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income Included Component		Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
	(dollars in thousands)

Year ended December 31, 2023
Interest Rate Products	$	19,598	$	19,598	$	—	Interest Income	$	(27,546)	$	(27,546)	$	—
Interest Rate Products	(10,550)		(10,550)		—		Interest Expense	1,696		1,696		—
Total	$	9,048	$	9,048	$	—		$	(25,850)	$	(25,850)	$	—
Year ended December 31, 2022
Interest Rate Products	$	(81,400)	$	(81,400)	$	—	Interest Income	$	(7,761)	$	(7,761)	$	—

Total	$	(81,400)	$	(81,400)	$	—		$	(7,761)	$	(7,761)	$	—

The following table presents the effect of fair value and cash flow hedge accounting on the income statement for the year ended December 31:


	Consolidated Statements of Income Classification
	2023				2022
	Interest Income		Interest Expense		Interest Income		Interest Expense
	(dollars in thousands)
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded	$	(27,546)	$	1,696	$	(7,761)	$	—
The effects of fair value and cash flow hedging:
Amount of gain or (loss) on cash flow hedging relationships	—		—		—		—
Interest contracts:
Amount of gain (loss) reclassified from AOCI into income	(27,546)		1,696		(7,761)		—
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring	—		—		—		—
Amount of gain (loss) reclassified from AOCI into income - included component	(27,546)		1,696		(7,761)		—
Amount of gain (loss) reclassified from AOCI into income - excluded component	—		—		—		—

During the next twelve months, the Corporation estimates that an additional $25.4 million will be reclassified as a decrease to interest income.

The following table presents the fair value gains (losses) on derivative financial instruments for the years ended December 31:


	Consolidated Statements of Income Classification	2023		2022		2021
		(dollars in thousands)
Mortgage banking derivatives(1)	Mortgage banking	$	(380)	$	(2,360)	$	(3,392)
Interest rate derivatives	Other income	(1,855)		—		1,050
Foreign exchange contracts	Other income	7		81		(36)
Net fair value gains/(losses) on derivative financial instruments		$	(2,228)	$	(2,279)	$	(2,378)

(1) Includes interest rate locks with customers and forward commitments.

Fair Value Option

The Corporation has elected to measure mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of December 31:


	2023		2022
	(dollars in thousands)
Amortized Cost (1)	$	14,792	$	7,180
Fair value	15,158		7,264

(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.

Gains related to changes in fair values of mortgage loans held for sale were $0.3 million for the year ended December 31, 2023. Losses related to changes in fair values of mortgage loans held for sale were $0.6 million for the year ended December 31, 2022, and losses related to changes in fair values of mortgage loans held for sale were $2.5 million for the year ended December 31, 2021. The gains and losses are recorded on the consolidated income statements as an adjustment to mortgage banking income.

Balance Sheet Offsetting

The fair values of interest rate derivative agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets if they are subject to master netting arrangements or similar agreements. The Corporation has elected to net its financial assets and liabilities designated as interest rate derivatives when offsetting is permitted. The following table presents the Corporation's financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets as of December 31:


Gross Amounts			Gross Amounts Not Offset
Recognized			on the Consolidated
on the			Balance Sheets
Consolidated			Financial		Cash		Net
Balance Sheets			Instruments(1)		Collateral(2)		Amount
	(dollars in thousands)
2023
Interest rate derivative assets	$	157,080	$	(15,154)	$	—	$	141,926
Foreign exchange derivative assets with correspondent banks	532		(532)		—		—
Total	$	157,612	$	(15,686)	$	—	$	141,926

Interest rate derivative liabilities	$	245,553	$	(21,343)	$	(93,841)	$	130,369
Foreign exchange derivative liabilities with correspondent banks	31		(532)		—		(501)
Total	$	245,584	$	(21,875)	$	(93,841)	$	129,868

2022
Interest rate derivative assets	$	166,614	$	(8,071)	$	—	$	158,543
Foreign exchange derivative assets with correspondent banks	101		(101)		—		—
Total	$	166,715	$	(8,172)	$	—	$	158,543

Interest rate derivative liabilities	$	296,267	$	(2,771)	$	(127,638)	$	165,858
Foreign exchange derivative liabilities with correspondent banks	499		(101)		—		398
Total	$	296,766	$	(2,872)	$	(127,638)	$	166,256

(1) For interest rate derivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default.

For interest rate derivative liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.

(2) Amounts represent cash collateral (pledged by the Corporation) or received from the counterparty on interest rate derivative transactions and foreign

exchange contracts with financial institution counterparties. Interest rate derivatives with customers are collateralized by the same collateral securing the

underlying loans to those borrowers. Cash collateral amounts are included in the table only to the extent of the net derivative fair values.

Cash Flow Hedge Terminations

In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion. As the hedged transaction continues to be probable, the unrealized losses that have been recorded in AOCI are recognized as reduction to interest income when the previously forecasted hedged item affects earnings in future periods. During 2023, $22.1 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the consolidated statements of income.