v3.25.2
Derivatives and Hedging Activities
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
Cash Flow Hedges

Interest Rate Cap Derivatives. In 2020, the Company purchased interest rate caps designated as cash flow hedges with notional amounts totaling $130,500,000 on its variable rate subordinated debentures. The interest rate caps, which matured as of March 31, 2025, required receipt of variable amounts from the counterparty when interest rates rose above the strike price in the contracts. The strike prices in the five year term contracts had a range from 1.5 percent to 2 percent. The variable rate was based on 90 days of compounded overnight SOFR plus a spread of 0.26161 percent. At June 30, 2025 and December 31, 2024, the interest rate caps had a fair value of $0 and $720,000, respectively, and were reported as other assets on the Company’s statements of financial condition. Amortization recorded on the interest rate caps totaled $0 and $84,000 for the six months ended June 30, 2025 and 2024, respectively, and was reported as a component of interest expense on subordinated debentures.

The effect of cash flow hedge accounting on OCI for the periods ending June 30, 2025 and 2024 was as follows:
Three Months endedSix Months ended
(Dollars in thousands)June 30,
2025		June 30,
2024		June 30,
2025		June 30,
2024
Amount of (loss) gain recognized in OCI
$— 270 (657)927 
Amount of gain reclassified from OCI to net income
— 1,288 63 2,548 

Fair Value Hedges

Interest Rate Swap Agreements. The Company entered into fair value hedges for a closed pool of fixed rate debt securities. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to offset changes in the fair value of the hedged item attributable to changes in the compounded overnight secured overnight financing (“SOFR”) rate, the designated benchmark interest rate. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Company making fixed-rate payments over the life of the contract, without the exchange of the underlying notional value.

During the fourth quarter of 2024, the Company terminated the existing fair value hedges and paid $19,825,000. This basis adjustment to the carrying cost of the closed pool will be amortized over the remaining life of the securities in the closed pool. Subsequent to the termination, the Company entered into new fair value hedges that better protected the Company from the risk of changes to the overnight SOFR rate.

The following tables present the notional and estimated fair value amount of derivative positions outstanding:
June 30, 2025
Weighted Average
(Dollars in thousands)Notional AmountAsset DerivativeLiability DerivativeRemaining MaturityReceive RatePay Rate
Interest rate swap - securities$1,630,500 $4,086 $— 0.7 yearsSOFR3.68 %

December 31, 2024
Weighted Average
(Dollars in thousands)Notional AmountAsset DerivativeLiability DerivativeRemaining MaturityReceive RatePay Rate
Interest rate swap - securities$1,630,500 $9,287 $— 1.2 yearsSOFR3.68 %

The following amounts were recorded on the consolidated statements of financial condition related to cumulative basis adjustments for fair value hedges for the respective periods:

(Dollars in thousands)Amortized cost of the Hedged AssetsAmortized Cost of Fair Value Hedging Included in the Carrying Amount of the Hedged Assets
Line item on the consolidated statements of financial conditionJune 30,
2025		December 31,
2024		June 30,
2025		December 31,
2024
Debt securities available-for-sale$2,966,121 $3,242,878 $(4,086)$(9,287)

The effects of the fair value hedge relationships on the consolidated statements of operations were as follows:
Three Months EndedSix Months ended
(Dollars in thousands)Location of Gain (Loss)June 30, 2025June 30, 2024June 30, 2025June 30, 2024
Interest rate swapInterest income on investment securities$1,810 $6,358 $351 25,958 
Debt securities available-for-saleInterest income on investment securities(9,358)(3,520)(5,201)(20,297)
Residential Real Estate Derivatives
The Company enters into residential real estate derivatives for commitments (“interest rate locks”) to fund certain residential real estate loans to be sold into the secondary market. At June 30, 2025 and December 31, 2024, loan commitments with interest rate lock commitments totaled $60,761,000 and $22,977,000, respectively. At June 30, 2025 and December 31, 2024, the fair value of the related derivatives on the interest rate lock commitments was $1,243,000 and $410,000, respectively, and was included in other assets with corresponding changes recorded in gain on sale of loans. The Company enters into free-standing derivatives to mitigate interest rate risk for most residential real estate loans to be sold. These derivatives include forward commitments to sell to-be-announced (“TBA”) securities which are used to economically hedge the interest rate risk associated with such loans and unfunded commitments. At June 30, 2025 and December 31, 2024, TBA commitments were $55,250,000 and $29,000,000, respectively. At June 30, 2025, the fair value of the related derivatives on the TBA securities was $559,000 and was included in other liabilities with corresponding changes recorded in gain on sale of loans. At December 31, 2024, the fair value of the related derivatives on the TBA securities was $169,000, and was included in other assets with corresponding changes recorded in gain on sale of loans. The Company does not enter into a commitment to sell these loans to an investor until the loan is funded and is ready to be delivered to the investor. Due to the forward sales commitments being short-term in nature, the corresponding derivatives are not significant. For all other residential real estate loans to be sold, the Company enters into “best efforts” forward sales commitments for the future delivery of loans to third party investors when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. Forward sales commitments on a “best efforts” basis are not designated in hedge relationships until the loan is funded.