v3.25.3

DERIVATIVE ASSETS AND LIABILITIES | 9 Months Ended
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Sep. 30, 2025
DERIVATIVE ASSETS AND LIABILITIES |
DERIVATIVE ASSETS AND LIABILITIES | NOTE 7: DERIVATIVE ASSETS AND LIABILITIES On February 1, 2024, the Bank entered into an interest rate swap agreement with an institutional counterparty to hedge against our exposure to changes in interest rates as part of our overall interest rate risk management strategy. On the date the agreement was entered into, the derivative was designated as a cash flow hedge, as it was undertaken to manage the risk of changes in cash flows on interest payments associated with a stream of variable-rate, short-term borrowings for a corresponding amount that are attributable to changes in the future financing rates of each rolling maturity. At inception and on a quarterly basis thereafter, an assessment is performed to determine the effectiveness of the derivative at reducing the risk associated with the hedged exposure. A cash flow hedge designated as highly effective is carried at fair value on the balance sheet with the portion of change in fair value of the cash flow hedge considered highly effective recognized in accumulated other comprehensive income (“AOCI”). If the cash flow hedge becomes ineffective, the portion of the change in fair value of the cash flow hedge considered ineffective is reclassified from AOCI to earnings. The hedging instrument is a pay-fixed, receive variable interest rate swap agreement having a beginning notional amount of $450 million. The Bank pays quarterly interest at a fixed-rate of 3.583% and receives quarterly interest payments calculated at the Daily Simple SOFR over the same period. The original term of the agreement is five years, expiring on February 1, 2029. On March 28, 2024, the original hedge position notional amount was reduced by $100 million, and a corresponding amount of the hedged item was simultaneously de-designated, resulting in the recording of a gain of $1.7 million, classified as capital markets activities on the accompanying statements of operations. At September 30, 2025, the fair value of the cash flow hedge was ($3.3) million and is classified as derivative liabilities with a corresponding amount classified as a component of AOCI on the accompanying balance sheet. At December 31, 2024, the fair value of the cash flow hedge was $5.1 million and is classified as derivative assets with a corresponding amount classified as a component of AOCI on the accompanying balance sheet. On January 29, 2025, the Bank entered into an interest rate swap agreement with an institutional counterparty to hedge the interest rate risk to earnings associated with the fair value changes in the valuation allowance of loans held for sale. The hedging instrument is a pay-fixed, receive-variable amortizing interest rate swap agreement with a notional amount of $1.0 billion. In the second quarter of 2025, the Company partially terminated $625 million notional amount in conjunction with the sale of $858 million principal balance of multifamily loans held for sale, resulting in recognition of a $7.1 million realized loss on partial termination, which is included as a component of capital markets activity on the consolidated statements of operations. The unamortized notional amount remaining was $356 million at September 30, 2025. The Bank pays quarterly interest at a fixed-rate of 4.03% and receives quarterly interest payments calculated at the Daily Simple SOFR over the same period. The term of the agreement is four years, expiring on January 29, 2029. Since the fair value changes of the valuation allowance for loans held for sale already flow through earnings, the Bank has elected to not designate the hedge for hedge accounting to ensure that changes in the derivative’s value are reported in current earnings each period. At September 30, 2025, the fair value of the hedge was ($5.8) million and is classified as derivative liabilities on the accompanying balance sheet.

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