Company: ASB
Filing Date: 2025-02-12
Form Type: 10-K
Source: 0000007789-25-000013
Chunk: 20

Company: ASSOCIATED BANC-CORP
Filing Date: 2025-02-12
Form: 10-K
Item: Item 8
Chunk 20
---
classified into earnings in the period during which the hedged item affects 

91

earnings. Changes in the fair value of derivatives which do not qualify for hedge accounting are reported in current period earnings.For those derivatives to which hedge accounting is applied, the Corporation formally documents the hedging relationship, the risk management objective, and strategy for undertaking the hedge. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the hedged risk, and, unless the hedge meets all of the criteria to assume there is no ineffectiveness, the method that will be used to assess the effectiveness of the hedging instrument. The Corporation typically assesses effectiveness using statistical regression at inception and on an ongoing basis, the shortcut method, or the critical terms match method. Shortcut method and critical terms match method assume perfect hedge effectiveness and eliminate the quantitative aspect of assessing hedge effectiveness.Hedge accounting is discontinued prospectively when:•The derivative is no longer effective or expected to be effective in offsetting changes in the fair value, cash flows, or changes in net investment of a hedged item (including firm commitments or forecasted transactions);•The derivative expires, is sold, terminated, or exercised;•The forecasted transaction is no longer probable of occurring by the end of the originally specified time period;•The hedged firm commitment no longer meets the definition of a firm commitment; or•the designation of the derivative as a hedging instrument is removed.When hedge accounting is discontinued and the derivative no longer qualifies as an effective fair value or cash flow hedge, the derivative continues to be carried on the balance sheet at fair value and changes in fair value will be recorded in current period earnings unless re-designated.Like other financial instruments, derivatives contain an element of credit risk, which is the possibility that the Corporation will incur a loss because the counterparty fails to meet its contractual obligations. Notional values of interest rate swaps and other off-balance sheet financial instruments significantly exceed the credit risk associated with these instruments and represent contractual balances on which calculations of amounts to be exchanged are based. Credit exposure is limited to the sum of the aggregate fair value of positions that have become favorable to the Corporation, including any accrued interest receivable due from counterparties. Potential credit losses are mitigated by derivatives through central clearing parties, careful evaluation of counterparty credit standing, selection of counterparties from a limited group of high quality institutions, collateral agreements, and other contract provisions. The corporation considers the value of collateral held and collateral provided in determining the net carrying value of derivatives.