Derivatives

3 Months Ended

Mar. 31, 2025

DERIVATIVES

We use derivative instruments and other risk management techniques to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with our risk management policies and for certain loan clients to allow them to hedge the risk of rising interest rates and on their variable rate loans.

Our derivatives are carried at fair value and recorded in "Other assets" or "Accrued interest payable and other liabilities," as appropriate, in the condensed consolidated balance sheets. On the date we enter into a derivative contract, the derivative is designated as a fair value hedge, cash flow hedge, or a hedge designation is not made as it is a customer-related transaction. When a derivative is designated as a fair value hedge or cash flow hedge, the Company performs an assessment at inception, and at least quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the fair value or cash flows of the hedged items.

The following table presents the U.S. dollar notional amounts and fair values of our derivative instruments included in the condensed consolidated balance sheets as of the dates indicated:


	March 31, 2025						December 31, 2024
	Notional		Fair Value				Notional		Fair Value
	Amount		Asset		Liability		Amount		Asset		Liability
	(In thousands)
Derivatives Designated as Hedging Instruments:
Cash flow hedges	$	300,000	$	—	$	2,081	$	300,000	$	1,442	$	—
Derivatives Not Designated as Hedging Instruments:
Interest rate contracts	192,405		5,380		5,308		192,405		6,516		6,428
Foreign exchange contracts	85,726		497		172		36,155		515		1,134
Equity warrant assets	15,447		3,497		—		16,066		3,763		—
Total contracts	$	593,578	$	9,374	$	7,561	$	544,626	$	12,236	$	7,562

Cash Flow Hedge

Cash flow hedges included pay-fixed, receive-floating interest rate swap contracts with notional amounts aggregating $300.0 million, five-year terms, and varying maturity dates throughout 2028. These swap contracts were entered into with institutional counterparties to hedge against variability in cash flow attributable to interest rate risk on a portion of the Company's borrowings. The cash flow hedges were deemed highly effective at inception and thereafter. For derivatives designated as cash flow hedges, the portion of changes in fair value considered to be highly effective are reported as a component of AOCI on the condensed consolidated balance sheets until the related cash flows from the hedged items are recognized in earnings. As of March 31, 2025, the fair value of the cash flow hedges represented a net liability of $2.1 million, related to which a loss of $2.3 million (net of tax) was included in AOCI. The estimated amount to be reclassified in the next 12 months out of AOCI into earnings is $0.1 million.

Terminated Cash Flow Hedge

The Company terminated all of the pay-fixed, receive floating interest rate swap contracts classified as cash flow hedges with notional amounts of $355.0 million entered into during 2024. At March 31, 2025, we had a pre-tax net loss of $0.5 million deferred in AOCI related to terminated cash flow hedges. Amounts deferred in AOCI from terminated cash flow hedges will be amortized into interest expense through the original maturity dates of the hedges as long as the hedged forecasted transactions continue to be expected to occur.

The following schedule summarizes amounts deferred in AOCI related to terminated cash flow hedges that will be fully classified into interest expense by the fourth quarter of 2025:


	2025
	(In thousands)
Period AOCI Amortization for Terminated Cash Flow Hedges:

Second quarter	$	320
Third quarter	191
Fourth quarter	1
Total	$	512

Other Interest Rate Swaps, Foreign Exchange Contracts, and Equity Warrant Assets Not Designated for Hedge Accounting

The Company offers borrowers interest rate swaps under a "back-to-back" loan hedging program and offsets these "pay floating/receive fixed" contracts with borrowers with "receive floating/pay fixed" swaps with counterparty banks. The total notional balance of these offsetting hedging contracts was $192.4 million at March 31, 2025.

The Company has also hedged the interest rate risk and foreign currency risk on €25.8 million of subordinated debt utilizing a combined cross currency swap/interest rate swap, which has had the effect of hedging the foreign currency risk and fixing the Euribor-based floating rate instrument at a fixed rate of 2.76% through July 2025. For the quarter ended March 31, 2025, changes in fair value and fees recorded to "Noninterest income" in the condensed consolidated statements of earnings were immaterial.

See Note 12. Fair Value Measurements for additional information regarding equity warrant assets.