The Company is exposed to certain risks arising from both economic conditions and its business operations. 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. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

The table below presents the fair value of derivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of June 30, 2021.


	Fair Values of Derivative Instruments
(Dollars in thousands)		Notional		Balance Sheet Location	Derivatives (Fair Value)



Derivatives not designated as hedging instruments:
Interest rate products		$	57,781	Other assets	$	3,754
Interest rate products		57,781		Other liabilities	(4,034)
Risk participation agreements		4,293		Other liabilities	(5)
Interest rate lock commitments with customers		182,616		Other assets	4,342
Interest rate lock commitments with customers		10,406		Other liabilities	(202)
Forward sale commitments		85,611		Other assets	510
Forward sale commitments		82,268		Other liabilities	(223)
Financial derivatives related to sales of certain Visa Class B shares		113,177		Other liabilities	(22,145)
Total derivatives		$	593,933		$	(18,003)

The table below presents the fair value of derivative financial instruments as well as their location on the Consolidated Statements of Financial Condition as of December 31, 2020.


	Fair Values of Derivative Instruments
(Dollars in thousands)		Notional		Balance Sheet Location	Derivatives (Fair Value)



Derivatives not designated as hedging instruments:
Interest rate products		$	61,326	Other assets	$	5,369
Interest rate products		61,326		Other liabilities	(5,851)
Risk participation agreements		4,372		Other liabilities	(10)
Interest rate lock commitments with customers		244,037		Other assets	8,496
Interest rate lock commitments with customers		8,413		Other liabilities	(117)
Forward sale commitments		50,705		Other assets	583
Forward sale commitments		258,186		Other liabilities	(2,240)
Financial derivatives related to sales of certain Visa Class B shares		113,177		Other liabilities	(24,039)
Total derivatives		$	801,542		$	(17,809)

The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

Changes to the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. During the first half of 2020, such derivatives were used to hedge the variable cash flows associated with a variable rate loan pool.

In 2020, the Company terminated its three interest rate derivatives that were designated as cash flow hedges for a net gain of $1.3 million, recognized in accumulated other comprehensive income (loss). Hedge accounting was discontinued, and the net gain in accumulated comprehensive income (loss) is reclassified into earnings when the transaction affects earnings. As the underlying hedged transaction continues to be probable, the $1.3 million net gain will be recognized into earnings on a straight-line basis over each derivative's original contract term. During the next twelve months, the Company estimates that $0.3 million will be reclassified as an increase to interest income. During the three and six months ended June 30, 2021, $0.1 million and $0.3 million, respectively, was reclassified into interest income.


	Amount of Gain Recognized in OCI on Derivative (Effective Portion)		Amount of Gain Recognized in OCI on Derivative (Effective Portion)		Location of Gain Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands)	Three Months Ended June 30,		Six Months Ended June 30,
Derivatives in cash flow hedging relationships	2020		2020
Interest rate products	$	(25)	$	1,560	Interest income
Total	$	(25)	$	1,560

The Company entered into agreements with two unrelated financial institutions whereby the Company enters into an interest rate swap transaction with the customer and offsets that transaction with another counterparty. Derivative financial instruments related to back-to-back swaps are recorded at fair value and are not designated as accounting hedges.

The Company entered into agreements with four unrelated financial institutions whereby those financial institutions entered into interest rate derivative contracts (interest rate swap transactions) directly with customers referred to them by the Company. Under the terms of the agreements, those financial institutions have recourse to us for any exposure created under each swap transaction, only in the event that the customer defaults on the swap agreement and the agreement is in a paying position to the third-party financial institution. This is a customary arrangement that allows us to provide access to interest rate swap transactions for our customers without creating the swap ourselves. These swap guarantees are accounted for as credit derivatives.

At June 30, 2021 and December 31, 2020, there were 248 and 234 variable-rate to fixed-rate swap transactions between the third-party financial institutions and the Company's customers, respectively. The initial notional aggregate amount was approximately $1.1 billion at both June 30, 2021 and December 31, 2020. At June 30, 2021, the swap transactions remaining maturities ranged from under 1 year to 14 years. At June 30, 2021, 206 of these customer swaps were in a paying position to third parties for $50.2 million, with our swap guarantees having a fair value of $13.0 million. At December 31, 2020, 231 of these customer swaps were in a paying position to third parties for $81.6 million, with the Company's swap guarantees having a fair value of $12.8 million. However, for both periods, none of the Company's customers were in default of the swap agreements.

Derivative financial instruments related to mortgage banking activities are recorded at fair value and are not designated as accounting hedges. This includes commitments to originate certain fixed-rate residential mortgage loans to customers, also referred to as interest rate lock commitments. The Company may also enter into forward sale commitments to sell loans to investors at a fixed price at a future date and trade asset-backed securities to mitigate interest rate risk.

The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the three and six months ended June 30, 2021 and June 30, 2020.








	Amount of (Loss) or Gain Recognized in Income				Amount of (Loss) Recognized in Income				Location of Gain or (Loss) Recognized in Income
(Dollars in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
Derivatives not designated as hedging instruments	2021		2020		2021		2020
Interest rate lock commitments with customers	$	(823)	$	3,178	$	(4,087)	$	6,227	Mortgage banking activities, net
Forward sale commitments	(2,742)		(2,439)		3,382		$	(6,484)	Mortgage banking activities, net
Total	$	(3,565)	$	739	$	(705)	$	(257)

The Company has agreements with certain derivative counterparties that contain a provision under which, if it 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.

The Company has minimum collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $6.5 million in securities and $6.1 million in cash against its obligations under these agreements. If the Company had breached any of these provisions at June 30, 2021, it could have been required to settle its obligations under the agreements at the termination value.