The Company uses derivative instruments to manage its exposure to market risks, including interest rate risk, and to assist customers with their risk management objectives. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, while other derivatives serve as economic hedges that do not qualify for hedge accounting. The Company is party to master netting arrangements with its financial institution counterparties. See Note 19 Balance Sheet Offsetting for more information.

The Company enters into certain interest rate swap contracts that are matched to closed portfolios of fixed-rate residential mortgage loans and available-for-sale investments securities. These contracts have been designated as hedging instruments to hedge the risk of changes in the fair value of the underlying loans or investment securities due to changes in interest rates. The related contracts are structured so that the notional amounts reduce over time to generally match the expected amortization of the underlying loan or investment security.

During the year ended December 31, 2024, the Company terminated several interest rate swap agreements with a total notional value of $1.7 billion. These interest rate swap agreements were designated as fair value hedging instruments. The termination of the interest rate swaps resulted in a loss of $20.2 million, which was allocated to the assets of the respective closed portfolios and will be amortized to interest income over the contractual terms of those assets using the effective interest method. In 2024, the Company amortized $0.4 million of these losses to interest income.

The notional amounts and fair values of the Company’s derivative financial instruments as of December 31, 2024 and 2023 were as follows:


	December 31, 2024					December 31, 2023
(dollars in thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value
Derivatives designated as hedging instruments
Interest Rate Swap Agreements 1	$	2,000,000	$	2,738		$	3,000,000	$	(48,672	)
Derivatives not designated as hedging instruments
Interest Rate Lock Commitments		1,534		34			5,899		148
Forward Commitments		3,517		6			8,583		(105	)
Interest Rate Swap Agreements
Receive Fixed/Pay Variable Swaps		2,123,665		(136,218	)		2,067,624		(114,701	)
Pay Fixed/Receive Variable Swaps		2,123,665		136,125			2,067,624		114,542
Foreign Exchange Contracts		1,302		(2	)		745		—
Conversion Rate Swap Agreement 2		96,466	NA				155,196	NA
Makewhole agreements 3		65,763	NA				—	NA

1 As of December 31, 2024, the amounts presented in the table above exclude forward starting swaps with a notional value of $300 million and a fair value of $4.7 million. These swaps are scheduled to begin between August 2025 and March 2026.

2 The conversion rate swap agreements were valued at zero as further reductions to the conversion rate were not reasonably estimable.

3 The makewhole agreements were valued at zero as the likelihood of a payment required to the buyer was not reasonably estimable.

The following table presents the Company’s derivative financial instruments, their fair values, and their location in the consolidated statements of condition as of December 31, 2024 and 2023:


	December 31, 2024				December 31, 2023
(dollars in thousands)	Asset Derivatives 1		Liability Derivatives 1		Asset Derivatives 1			Liability Derivatives 1
Interest Rate Swap Agreements
Not designated as hedging instruments	$	146,923	$	147,016	$	143,593		$	143,752
Designated as hedging instruments		14,507		7,039		(48,672	)		—
		161,430		154,055		94,921			143,752
Derivatives not designated as hedging instruments
Interest Rate Lock Commitments		34		—		148			—
Forward Commitments		9		3		—			105
Foreign Exchange Contracts		—		2		—			—
Total Derivatives	$	161,473	$	154,060	$	95,069		$	143,857

1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the consolidated statements of condition. Derivatives are recognized on the Company’s consolidated statements of condition at fair value.

The following table presents the Company’s derivative financial instruments and the amount and location of the net gains or losses recognized in the consolidated statements of income for the years ended December 31, 2024, 2023 and 2022:


		Year Ended December 31,
(dollars in thousands)	Location of Net Gains (Losses) Recognized in the Consolidated Statements of Income	2024			2023			2022
Derivatives designated as hedging instruments
Recognized on Interest Rate Swap Agreements	Interest Income on Investment Securities Available-for-Sale	$	17,679		$	(20,293	)	$	—
Recognized on Hedged Item	Interest Income on Investment Securities Available-for-Sale		(17,903	)		20,260			—
Net Cash Settlements	Interest Income on Investment Securities Available-for-Sale		8,772			3,682			—
Recognized on Interest Rate Swap Agreements	Interest and Fees on Loans and Leases		18,301			(28,379	)		—
Recognized on Hedged Item	Interest and Fees on Loans and Leases		(18,296	)		28,386			—
Net Cash Settlements	Interest and Fees on Loans and Leases		13,435			4,161			—
Derivatives not designated as hedging instruments
Interest Rate Lock Commitments	Mortgage Banking		805			828			(915	)
Forward Commitments	Mortgage Banking		210			—			2,348
Interest Rate Swap Agreements	Other Noninterest Income		64			(96	)		44
Foreign Exchange Contracts	Other Noninterest Income		4,398			3,745			1,792
Conversion Rate Swap Agreement	Investment Securities Gains (Losses), Net		(2,390	)		(1,598	)		—
Total		$	25,075		$	10,696		$	3,269

The following amounts were recorded on the consolidated statements of condition related to the cumulative basis adjustment for fair value hedges of derivative financial instruments designated as hedging instruments as of December 31, 2024 and 2023:


Line Item in the Consolidated Statements of Condition	Carrying Amount of the Hedged Assets				Cumulative Amount of Fair Value Hedging Adjustment Included In the Carrying Amount of the Hedged Assets
(dollars in thousands)	2024		2023		2024			2023
Investment Securities, Available-for-Sale 1	$	999,594	$	1,320,260	$	(406	)	$	20,260
Loans and Leases 2		1,292,670		1,728,386		(7,330	)		28,386

1 These amounts were included in the fair value of closed portfolios of investment securities, available-for-sale 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. As of December 31, 2024 and 2023, the fair value of the closed portfolios used in these hedging relationships was $1.7 billion and $1.8 billion, respectively.

2 These amounts were included in the amortized cost basis of closed portfolios of loans 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. As of December 31, 2024 and 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $3.0 billion and $3.2 billion, respectively.

Management has received authorization from the Bank’s Board of Directors to use derivative financial instruments as an end-user in connection with the Bank’s risk management activities and to accommodate the needs of the Bank’s customers. As with any financial instrument, derivative financial instruments have inherent risks. Market risk is defined as the risk of adverse financial impact due to fluctuations in interest rates, foreign exchange rates, and equity prices. Market risks associated with derivative financial instruments are balanced with the expected returns to enhance earnings performance and shareholder value, while limiting the volatility of each. The Company uses various processes to monitor its overall market risk exposure, including earnings, valuation and price sensitivity analysis, and other methodologies.

Derivative financial instruments are also subject to credit and counterparty risk, which is defined as the risk of financial loss if a borrower or counterparty is either unable or unwilling to repay borrowings or settle transactions in accordance with the underlying contractual terms. Credit and counterparty risks associated with derivative financial instruments are similar to those relating to traditional financial instruments. The Company manages derivative credit and counterparty risk by evaluating the creditworthiness of each borrower or counterparty, adhering to the same credit approval process used for commercial lending activities.

The Company’s free-standing derivative financial instruments are required to be carried at their fair value on the Company’s consolidated statements of condition. These financial instruments have been limited to interest rate lock commitments (“IRLCs”), forward commitments, interest rate swap agreements, foreign exchange contracts, and conversion rate swap agreements.

The Company enters into IRLCs for residential mortgage loans which commit us to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. To mitigate this risk, the Company utilizes forward commitments as economic hedges against the potential decreases in the values of the loans held for sale. IRLCs and forward commitments are free-standing derivatives which are carried at fair value with changes recorded in the mortgage banking component of noninterest income in the Company’s consolidated statements of income.

The Company enters into swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. The Company mitigates the interest rate risk of entering into these agreements by entering into equal and offsetting interest rate swap agreements with highly rated third party financial institutions. The interest rate swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of condition (asset positions are included in other assets and liability positions are included in other liabilities). Fair value changes are recorded in other noninterest income in the Company’s consolidated statements of income. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash and marketable securities, is posted by the party (i.e., the Company or the financial institution counterparty) with net liability positions in accordance with contract thresholds. The Company had a net asset position with its financial institution counterparties totaling $136.1 million and $114.5 million as of December 31, 2024 and 2023, respectively. See Note 19 Balance Sheet Offsetting for more information on the interest rate swap agreements.

The Company utilizes foreign exchange contracts to offset risks related to transactions executed on behalf of customers. The foreign exchange contracts are free-standing derivatives which are carried at fair value with changes included in other noninterest income in the Company’s consolidated statements of income.

As certain sales of Visa Class B restricted shares were completed, the Company entered into a conversion rate swap agreement with the buyer that requires payment to the buyer in the event Visa further reduces the conversion rate of Class B into Class A unrestricted common shares. In the event of Visa increasing the conversion rate, the buyer would be required to make payment to the Company. As of December 31, 2024 and 2023, the conversion rate swap agreements were valued at zero (i.e., no contingent liability recorded) as further reductions to the conversion rate were deemed not reasonably estimable by management. See Note 3 Investment Securities for more information

In May 2024, the Company entered into makewhole agreements with certain buyers of its Visa Class B restricted shares that reduces the payments that would be required pursuant to the conversion rate swap agreement described above, but would require payment to the buyer in the event Visa requires additional legal reserves to settle ongoing litigation. As of December 31, 2024, the makewhole agreements were valued at zero (i.e., no contingent liability recorded) as the likelihood of the Company being required to make a payment to the buyer is not reasonably estimable by management.

The Company is exposed to changes in the fair value of fixed-rate assets due to changes in benchmark interest rates. The Company entered into pay-fixed and receive-floating interest rate swaps to manage its exposure to changes in fair value of its AFS investment securities and fixed rate residential mortgage loans. These interest rate swaps are designated as fair value hedges using the portfolio layer method. The Company receives variable-rate interest payments in exchange for making fixed-rate payments over the lives of the contracts without exchanging the notional amounts. The fair value hedges are recorded as components of other assets and other liabilities in the Company’s consolidated statements of condition. The gain or loss on these derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk are recognized in interest income in the Company’s consolidated statements of income.