The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s loans and borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk of the Company’s assets or liabilities. The Company has entered into an offsetting position for each of these derivative instruments with a matching instrument from another financial institution in order to minimize its net risk exposure resulting from such transactions.

The table below presents the fair value of the Company’s derivative financial instruments as of June 30, 2020 and December 31, 2019. The Company’s derivative assets and derivative liabilities are located within Other assets and Other liabilities, respectively, on the Company’s Consolidated Balance Sheets.

Derivative fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

This table provides a summary of the fair value of the Company’s derivative assets and liabilities as of June 30, 2020 and December 31, 2019 (in thousands):

	Derivative Assets				Derivative Liabilities
	June 30,		December 31,		June 30,		December 31,
Fair Value	2020		2019		2020		2019
Interest Rate Products:
Derivatives not designated as hedging instruments	$	119,209	$	47,458	$	10,704	$	5,997
Derivatives designated as hedging instruments		36,090		7,818		—		—
Total	$	155,299	$	55,276	$	10,704	$	5,997

The Company is exposed to changes in the fair value of certain of its fixed-rate assets and liabilities due to changes in the benchmark interest rate, London Interbank Offered Rate (LIBOR). Interest rate swaps designated as fair value hedges involve making fixed rate payments to a counterparty in exchange for the Company receiving variable rate payments over the life of the agreements without the exchange of the underlying notional amount. As of June 30, 2020 and December 31, 2019, the Company had one interest rate swap that was designated as a fair value hedge of interest rate risk associated with the Company’s fixed rate loan assets. This swap had a notional amount of $5.2 million and $5.3 million as of June 30, 2020 and December 31, 2019, respectively.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings.

The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and floors as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of June 30, 2020 and December 31, 2019, the Company had two interest rate swaps that were designated as cash flow hedges of interest rate risk associated with the Company’s variable-rate subordinated debentures issued by Marquette Capital Trusts III and IV. These swaps had an aggregate notional amount of $51.5 million at both June 30, 2020 and December 31, 2019. Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an upfront premium. As of June 30, 2020 and December 31, 2019, the Company had one interest rate floor with a notional amount of $750.0 million that was designated as a cash flow hedge of interest rate risk.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and is subsequently reclassified into interest expense and interest income in the period during which the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to interest rate swap derivatives will be reclassified to Interest expense as interest payments are received or paid on the Company’s derivatives. Amounts reported in AOCI related to interest rate floor derivatives will be reclassified to Interest income as interest payments are received or paid on the Company’s derivatives. The Company expects to reclassify $1.3 million from AOCI to Interest expense and $5.1 million from AOCI to Interest income during the next 12 months. As of June 30, 2020, the Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 16.22 years.

The remainder of the Company’s derivatives are not designated in qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously offset by interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of June 30, 2020, the Company had 156 interest rate swaps with an aggregate notional amount of $2.1 billion related to this program. As of December 31, 2019, the Company had 142 interest rate swaps with an aggregate notional amount of $1.9 billion.

Effect of Derivative Instruments on the Consolidated Statements of Income and Accumulated Other Comprehensive Income

This table provides a summary of the amount of gain or loss recognized in Other noninterest expense in the Consolidated Statements of Income related to the Company’s derivative assets and liabilities for the three and six months ended June 30, 2020 and June 30, 2019 (in thousands):

	Amount of Gain (Loss) Recognized
	For the Three Months Ended						For the Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2020			2019			2020			2019
Interest Rate Products
Derivatives not designated as hedging instruments	$	16		$	(1,476	)	$	(243	)	$	(2,349	)
Total	$	16		$	(1,476	)	$	(243	)	$	(2,349	)
Interest Rate Products
Derivatives designated as hedging instruments:
Fair value adjustments on derivatives	$	(3	)	$	(105	)	$	(206	)	$	(163	)
Fair value adjustments on hedged items		3			104			205			163
Total	$	—		$	(1	)	$	(1	)	$	—

These tables provide a summary of the effect of hedges on AOCI in the Consolidated Statements of Comprehensive Income related to the Company’s derivative assets and liabilities for the three and six months ended June 30, 2020 and June 30, 2019 (in thousands):

	For the Three Months Ended June 30, 2020
Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI on Derivative			Gain (Loss) Recognized in OCI Included Component			Loss Recognized in OCI Excluded Component			Gain (Loss) Reclassified from AOCI into Earnings			Gain (Loss) Reclassified from AOCI into Earnings Included Component			Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floor	$	4,687		$	6,197		$	(1,510	)	$	771		$	1,407		$	(636	)
Interest rate swaps		(75	)		(75	)		—			(257	)		(257	)		—
Total	$	4,612		$	6,122		$	(1,510	)	$	514		$	1,150		$	(636	)

	For the Three Months Ended June 30, 2019
Derivatives in Cash Flow Hedging Relationships	Loss Recognized in OCI on Derivative			Loss Recognized in OCI Included Component			Loss Recognized in OCI Excluded Component		Loss Reclassified from AOCI into Earnings			Loss Reclassified from AOCI into Earnings Included Component			Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate swaps	$	(3,061	)	$	(3,061	)	$	—	$	(20	)	$	(20	)	$	—
Total	$	(3,061	)	$	(3,061	)	$	—	$	(20	)	$	(20	)	$	—

	For the Six Months Ended June 30, 2020
Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI on Derivative			Gain (Loss) Recognized in OCI Included Component			Loss Recognized in OCI Excluded Component			Gain (Loss) Reclassified from AOCI into Earnings			Gain (Loss) Reclassified from AOCI into Earnings Included Component			Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floor	$	29,621		$	35,493		$	(5,872	)	$	135		$	1,407		$	(1,272	)
Interest rate swaps		(10,484	)		(10,484	)		—			(389	)		(389	)		—
Total	$	19,137		$	25,009		$	(5,872	)	$	(254	)	$	1,018		$	(1,272	)

	For the Six Months Ended June 30, 2019
Derivatives in Cash Flow Hedging Relationships	Loss Recognized in OCI on Derivative			Loss Recognized in OCI Included Component			Loss Recognized in OCI Excluded Component		Loss Reclassified from AOCI into Earnings			Loss Reclassified from AOCI into Earnings Included Component			Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate swaps	$	(5,149	)	$	(5,149	)	$	—	$	(15	)	$	(15	)	$	—
Total	$	(5,149	)	$	(5,149	)	$	—	$	(15	)	$	(15	)	$	—

The Company has agreements with certain of its derivative counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

As of June 30, 2020, the termination value of derivatives in a net liability position, which includes accrued interest, related to these agreements was $430 thousand. The Company has minimum collateral posting thresholds with certain of its derivative counterparties. At June 30, 2020, the Company had posted $345 thousand of collateral. If the Company had breached any of these provisions at June 30, 2020, it could have been required to settle its obligations under the agreements at the termination value.