The Company primarily uses derivatives to manage exposure to market risk, including interest rate risk and credit risk and to assist customers with their risk management objectives. Management will designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s remaining derivatives consist of derivatives held for customer accommodation or other purposes.

We enter into cash flow hedge relationships to mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company uses interest rate swaps, floors, caps and collars to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans. To qualify for hedge accounting, a formal assessment is prepared to determine whether the hedging relationship, both at inception and on an ongoing basis, is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the cash flow hedge. At inception a statistical regression analysis is prepared to determine hedge effectiveness. At each reporting period thereafter, a statistical regression or qualitative analysis is performed. If it is determined that hedge effectiveness has not been or will not continue to be highly effective, then hedge accounting ceases and any gain or loss in AOCI is recognized in earnings immediately. The cash flow hedges are recorded at fair value in other assets and other liabilities on the consolidated balance sheets with changes in fair value recorded in AOCI, net of tax. Amounts recorded to AOCI are reclassified into earnings in the same period in which the hedged asset or liability affects earnings and are presented in the same income statement line item as the earnings effect of the hedged asset or liability.

In order to accommodate the borrowing needs of certain commercial customers, the Company has entered into interest rate swap or cap agreements with those customers. These interest rate derivative contracts effectively allow the Company’s customers to convert a variable rate loan into a fixed rate loan. In order to offset the exposure and manage interest rate risk, at the time an agreement was entered into with a customer, the Company entered into an interest rate swap or cap with a correspondent bank counterparty with offsetting terms. These derivative instruments are not designated as accounting hedges and changes in the net fair value are recognized in noninterest income or expense. Because the Company acts as an intermediary for its customers, changes in the fair value of the underlying derivative contracts substantially offset each other and do not have a material impact on the Company’s results of operations. The fair value amounts are included in other assets and other liabilities.

The fair value of derivative positions outstanding is included in other assets and accounts payable and other liabilities on the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows. For derivatives not designated as hedging instruments, swap fee income and gains and losses due to changes in fair value are included in other noninterest income and the operating section of the consolidated statement of cash flows. For derivatives designated as hedging instruments, the entire change in the fair value related to the derivative instrument is recognized as a component of other comprehensive income and subsequently reclassified into interest income or interest expense when the forecasted transaction affects income.


	March 31, 2025						December 31, 2024
			Estimated Fair Value						Estimated Fair Value
	Notional Amount		Asset Derivative		Liability Derivative		Notional Amount		Asset Derivative		Liability Derivative
Derivatives designated as hedging instruments (cash flow hedges):
Interest rate swap on money market deposit account payments	$	—	$	—	$	—	$	250,000	$	2,361	$	—
Interest rate swaps on variable rate funding sources	275,000		129		2,423		275,000		201		1,821
Interest rate swaps on customer loan interest payments	375,000		—		32,676		375,000		—		39,517
Interest rate collars on customer loan interest payments	700,000		6,509		327		700,000		3,780		555
Interest rate floor on customer loan interest payments	200,000		1,634		—		200,000		1,444		—
Total derivatives designated as hedging instruments	$	1,550,000	$	8,272	$	35,426	$	1,800,000	$	7,786	$	41,893

Derivatives not designated as hedging instruments:
Financial institution counterparty:
Interest rate swaps	$	852,742	$	18,096	$	3,965	$	857,625	$	25,328	$	1,651
Interest rate caps and collars	5,500		—		—		4,000		—		—
Commercial customer counterparty:
Interest rate swaps	852,742		3,688		17,516		857,625		1,514		24,817
Interest rate caps and collars	5,500		—		—		4,000		—		—
Total derivatives not designated as hedging instruments	$	1,716,484	$	21,784	$	21,481	$	1,723,250	$	26,842	$	26,468
Offsetting derivative assets/liabilities	—		(23,519)		(23,519)		—		(28,239)		(28,239)
Total derivatives	$	3,266,484	$	6,537	$	33,388	$	3,523,250	$	6,389	$	40,122


	For the Three Months Ended March 31, 2025						For the Three Months Ended March 31, 2024
	(Loss) gain recognized in other comprehensive income on derivative		Gain (loss) reclassified from AOCI into income		Location of (loss) gain reclassified from AOCI into income		Gain (loss) recognized in other comprehensive income on derivative		Gain (loss) reclassified from AOCI into income		Location of (loss) gain reclassified from AOCI into income
Derivatives designated as hedging instruments (cash flow hedges):
Interest rate swap on borrowing advances	$	(1,082)	$	1,082	Interest Expense		$	(1,094)	$	1,094	Interest Expense
Interest rate swap on money market deposit account payments	(3,035)		2,402		Interest Expense		1,849		3,439		Interest Expense
Interest rate swaps, collars and floors on customer loan interest payments	10,833		(4,020)		Interest Income		(9,250)		(5,369)		Interest Income
Total	$	6,716	$	(536)			$	(8,495)	$	(836)

					Net gain recognized in other noninterest income						Net gain recognized in other noninterest income
Derivatives not designated as hedging instruments:
Interest rate swaps, caps and collars					$	700					$	449