The Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash receipts and its known or expected cash payments, principally to manage the Corporation’s interest rate risk. Additionally, the Corporation enters into interest rate derivatives to accommodate the business requirements of its customers. Derivatives are measured at fair value. Derivative assets are included in other assets and derivative liabilities are included in other liabilities in the Unaudited Consolidated Balance Sheets. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation.

Interest rate risk management agreements, such as swaps, caps, floors, and collars, are used from time to time as part of the Corporation’s interest rate risk management strategy. Interest rate swaps are agreements in which the Corporation and another party agree to exchange interest payments (e.g., fixed-rate for variable-rate payments or variable-rate for fixed-rate payments) computed on a notional principal amount. Interest rate caps and floors represent options purchased by the Corporation to manage the interest rate paid throughout the term of the option contract. An interest rate collar is a derivative instrument that represents simultaneously buying an interest rate cap and selling an interest rate floor. The credit risk associated with these derivative transactions is the risk of default by the counterparty. To minimize this risk, the Corporation enters into interest rate agreements only with highly rated counterparties that management believes to be creditworthy. The notional amounts of these agreements do not represent amounts exchanged by the parties and, thus, are not a measure of the potential loss exposure.

As of June 30, 2025 and December 31, 2024, the Corporation had interest rate swap contracts and interest rate collars that were designated as cash flow hedges. These cash flow hedges were executed to hedge the interest rate risk associated with short-term borrowings. See Note 10 for additional disclosure on borrowings. The changes in fair value of these derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized (i.e., in the same period during which the hedged transactions affect earnings.)

The Corporation previously had an interest rate swap contract that was designated as a cash flow hedge to hedge the interest rate risk associated with a pool of variable rate commercial loans. On March 31, 2023, the Corporation terminated this interest rate swap contract and the derivative liability was derecognized. The loss on this interest rate swap included in the AOCL component of shareholders’ equity was updated to its termination date fair value of $26.5 million, or $20.1 million after tax. This loss is being amortized into earnings as a reduction of interest income on a straight-line basis over the remaining life of the original interest rate swap term, or through May 1, 2026. At June 30, 2025, the remaining unamortized balance of the loss included in the AOCL component of shareholders’ equity was $7.2 million, or $5.4 million after tax.

As of June 30, 2025 and December 31, 2024, the Corporation had interest rate swap contracts that were designated as fair value hedges. The fair value hedges were executed to hedge the interest rate risk associated with a closed-pool of fixed-rate residential real estate loans (the “hedged item”). The hedged item is measured at fair value through a basis adjustment recognized on the balance sheet. The changes in fair value of derivatives designated as fair value hedges, as well as the offsetting changes in fair value of the hedged item are recognized in earnings.

The Corporation enters into interest rate swap and interest rate cap contracts to help commercial loan borrowers manage their interest rate risk. These interest rate swap contracts allow borrowers to convert variable-rate loan payments to fixed-rate loan payments, while interest rate cap contracts allow borrowers to limit their interest rate exposure in a rising rate environment. When the Corporation enters into an interest rate derivative contract with a commercial loan borrower, it simultaneously enters into a “mirror” interest rate contract with a third party. For interest rate swaps, the third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments. The Corporation’s credit policies with respect to interest rate contracts with commercial borrowers are similar to those used for loans. The Corporation retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans. The interest rate contracts with counterparties are generally subject to bilateral collateralization terms. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

The Corporation has entered into risk participation agreements with other banks in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

Under a risk participation-out agreement, a derivative asset, the Corporation participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Corporation assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

Interest rate lock commitments are extended to borrowers and relate to the origination of mortgage loans held for sale. To mitigate the interest rate risk and pricing risk associated with rate locks and mortgage loans that are originated and intended for sale, the Corporation enters into forward sale commitments. Forward sale commitments are contracts for delayed delivery or net settlement of the underlying instrument, such as a residential mortgage loan, where the seller agrees to deliver on a specified future date, either a specified instrument at a specified price or yield or the net cash equivalent of an underlying instrument. Both interest rate lock commitments and forward sale commitments are derivative financial instruments, but do not meet criteria for hedge accounting and therefore, the changes in fair value of these commitments are recognized in earnings.


(Dollars in thousands)	June 30, 2025			December 31, 2024
		Fair Value			Fair Value
	Notional Amounts	Derivative Assets	Derivative Liabilities	Notional Amounts	Derivative Assets	Derivative Liabilities
Derivatives Designated as Cash Flow Hedging Instruments:
Interest rate risk management contracts:

Interest rate swaps (1)	$120,000	$279	$1,011	$120,000	$1,529	$229
Interest rate collars	100,000	—	63	50,000	—	30

Derivatives Designated as Fair Value Hedging Instruments:
Interest rate risk management contracts:
Interest rate swaps	100,000	179	—	100,000	1,477	—
Derivatives not Designated as Hedging Instruments:
Loan related derivative contracts:
Interest rate contracts with customers	856,539	6,134	32,834	886,912	2,468	51,372
Mirror contracts with counterparties	856,539	32,710	6,221	886,912	51,176	2,529
Risk participation agreements	322,425	37	—	343,935	29	—

Mortgage loan commitments:
Interest rate lock commitments	37,232	785	23	20,238	248	—
Forward sale commitments	84,050	4	1,012	52,100	163	291
Gross amounts		40,128	41,164		57,090	54,451
Less: amounts offset (2)		6,500	6,500		2,788	2,788
Derivative balances, net of offset		33,628	34,664		54,302	51,663
Less: collateral pledged (3)		—	—		—	—
Net amounts		$33,628	$34,664		$54,302	$51,663

(1)The fair value of derivative assets includes accrued interest receivable of $79 thousand and $120 thousand, respectively, at June 30, 2025 and December 31, 2024. There was no accrued interest payable included in the fair value of derivative liabilities at June 30, 2025 or at December 31, 2024.

(1)Represents the carrying value of the hedged item associated with fair value hedges on a closed-pool of fixed-rate residential real estate loans that are expected to be outstanding for the designated hedged periods. The amortized cost balance of the closed-pool of residential real estate loans used in the fair value hedges was $634.8 million and $733.2 million, respectively, at June 30, 2025 and December 31, 2024.


(Dollars in thousands)	Amounts Recognized in Other Comprehensive Income (Loss), Net of Tax
	Three Months		Six Months
Periods ended June 30,	2025	2024	2025	2024
Derivatives Designated as Cash Flow Hedging Instruments:
Interest rate risk management contracts:
Interest rate swaps	$1,094	$1,846	$1,693	$5,051
Interest rate collars	(18)	(31)	(24)	(31)


Total	$1,076	$1,815	$1,669	$5,020


(Dollars in thousands)		Amount of Gain (Loss) Recognized in the Unaudited Consolidated Statements of Income
		Three Months		Six Months
Periods ended June 30,	Statement of Income Location	2025	2024	2025		2024
Derivatives Designated as Cash Flow Hedging Instruments:
Interest rate risk management contracts:
Interest rate swaps	Interest income: Interest and fees on loans	($2,139)	($2,140)	$	(4,255)	$	(4,279)
Interest rate swaps	Interest expense: FHLB advances	192	495	386		988

Derivatives Designated as Fair Value Hedging Instruments:
Interest rate risk management contracts:
Interest rate swaps	Interest income: Interest and fees on loans	(519)	—	(1,298)		—
Hedged item	Interest income: Interest and fees on loans	520	—	1,302		—
Derivatives not Designated as Hedging Instruments:
Loan related derivative contracts:
Interest rate contracts with customers	Loan related derivative income	$4,357	($6,348)	$14,154		($25,357)
Mirror interest rate contracts with counterparties	Loan related derivative income	(3,690)	6,404	(13,418)		25,714
Risk participation agreements	Loan related derivative income	9	(7)	41		(24)

Mortgage loan commitments:
Interest rate lock commitments	Mortgage banking revenues	(55)	(48)	515		200
Forward sale commitments	Mortgage banking revenues	(87)	177	(726)		243
Total		($1,412)	($1,467)	($3,299)		($2,515)