11.     Derivative Financial Instruments

At June 30, 2025, the Company’s derivative financial instruments consisted of interest rate swaps and interest rate floor options. At December 31, 2024, the Company’s derivative financial instruments consisted of interest rate swaps. At June 30, 2025, the Company’s derivatives are used for four purposes: 1) to mitigate the Company’s exposure to rising interest rates on certain fixed rate loans with a notional amount of $712.0 million and $695.6 million of swaps outstanding at June 30, 2025 and December 31, 2024, respectively; 2) to facilitate risk management strategies for our loan customers with $1.0 billion of swaps outstanding, which include $523.2 million each with customers and bank counterparties at June 30, 2025 and $973.9 million of swaps outstanding, which include $486.9 million each with customers and bank counterparties at December 31, 2024; 3) to mitigate exposure to rising interest rates on certain short-term advances and brokered deposits with $725.8 million and $950.8 million of swaps outstanding at June 30, 2025 and December 31, 2024, respectively; and 4) to mitigate the Company’s exposure to decreasing interest rates on a portion of its adjustable rate loan portfolio with a notional amount of $100.0 million of interest rate floor options outstanding at June 30, 2025. There were no interest rate floor options outstanding at December 31, 2024.

At June 30, 2025 and December 31, 2024, the Company maintained portfolio layer hedges on a closed portfolio of loans with a notional amount of $520.0 million and $500.0 million, respectively.

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For non-portfolio layer method fair value hedges, the hedge basis (the amount of the change in fair value) is added to (or subtracted from) the carrying amount of the hedged item. For portfolio layer method hedges, the hedge basis does not adjust the carrying value of the hedged item and is instead maintained on a closed portfolio basis. These basis adjustments would be allocated to the amortized cost of specific loans within the pools if the hedges were de-designated.

At June 30, 2025 and December 31, 2024, we held derivatives designated as cash flow hedges, fair value hedges and certain derivatives not designated as hedges.

The Company’s derivative instruments are carried at fair value in the Company’s financial statements as part of Other assets for derivatives with positive fair values and Other liabilities for derivatives with negative fair values. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies and has been designated as a hedge for accounting purposes, and further, by the type of hedging relationship.

At June 30, 2025 and December 31, 2024, derivatives with a combined notional amount of $1.0 billion and $973.9 million, respectively, were not designated as hedges. At June 30, 2025 and December 31, 2024, derivatives with a combined notional amount of $712.0 million and $695.6 million, respectively, were designated as fair value hedges. At June 30, 2025 and December 31, 2024, derivatives with a combined notional amount of $825.8 million and $950.8 million, respectively, were designated as cash flow hedges.

For cash flow hedges, the changes in the fair value of the derivatives are reported in accumulated other comprehensive income (loss), net of tax. Amounts in accumulated other comprehensive income (loss) are reclassified into earnings in the same period during which the hedged forecasted transaction affected earnings. During the three months ended June 30, 2025 and 2024, $2.8 million and $6.4 million in reduced expense, respectively, was reclassified from accumulated other comprehensive income (loss) to interest expense. During the six months ended June 30, 2025 and 2024, $7.3 million and $13.3 million in reduced expense was reclassified from accumulated other comprehensive loss to interest expense. The estimated amount to be reclassified in the next 12 months out of accumulated other comprehensive income (loss) into earnings is $4.1 million in reduced expense.

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A portion of the reduced expense is driven by the amortization of income from terminated cash flow hedges. This income is amortized over the remaining original terms of terminated cash flow hedges. During the three months ended June 30, 2025 and 2024, there were no cashflow hedges terminated. During the six months ended June 30, 2025, there were no cashflow hedges terminated. During the six months ended June 30, 2024, the Company terminated seven cash flow hedges with a combined notional value of $420.8 million, resulting in a net gain of $1.7 million. During the three months ended June 30, 2025 and 2024, income from the amortization of terminated cash flow hedges totaled $0.1 million and $0.2

million, respectively. During the six months ended June 30, 2025 and 2024, income from the amortization of terminated cash flow hedges totaled $0.3 million and $1.0 million, respectively.

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The following table sets forth information regarding the Company’s derivative financial instruments at the periods indicated:

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(1) Derivatives in a positive position are recorded as “Other assets” and derivatives in a negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.

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The following table presents information regarding the Company’s fair value hedged items for the periods indicated:

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(1) Carrying amount represents the amortized cost of the portfolio layer method closed portfolio at June 30 2025 and December 31, 2024, totaling $2.3 billion and $2.4 billion, respectively. The cumulative amount of basis adjustments at June 30, 2025 and December 31, 2024 were ($0.9) million and $2.0 million, respectively.

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The following table sets forth the effect of derivative instruments on the Consolidated Statements of Operations for the periods indicated:

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The Company’s derivatives are subject to master netting arrangements between the Company and its designated counterparties. The Company has not made a policy election to offset its derivative positions. The interest rate swaps with borrowers are cross collateralized with the underlying loan and, therefore, there is no posted collateral. Interest rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount and receive collateral for agreements in a net asset position.

The following table presents the effect of the master netting arrangements on the presentation of the derivative assets and liabilities in the Consolidated Statements of Financial Condition as of the dates indicated

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