Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third-party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. The Bank had approximately $65.4 million and $135.7 million of interest rate lock commitments at December 31, 2021 and 2020, respectively. There were $305.0 million of forward sales of mortgage-backed securities and $265.0 million of forward commitments for the future delivery of residential mortgage loans at December 31, 2021 and 2020, respectively.

The fair value of these mortgage banking derivatives are reflected by a derivative asset or a derivative liability. The table below provides data about the carrying values of these derivative instruments:

December 31, 2021

December 31, 2020

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Carrying

Net Carrying

Carrying

Net Carrying

Value

(In Thousands)

Derivatives not designated as hedging
instruments

Mortgage Banking

Derivatives

2,336

—

2,336

3,833

—

3,833

The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments. The difference in derivative net carrying value at December 31, 2021 and 2020 represents a fair value adjustment that runs through mortgage banking income.


	Twelve Months Ended December 31,
	2021			2020		2019
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	(1,497	)	$	2,154	$	598

The Company maintains an interest rate protection program for commercial loan customers that was acquired in the Merger. Under this program, the Company provides a customer with a fixed rate loan while creating a variable rate asset for the Company by the customer entering into an interest rate swap with terms that match the loan. The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution. The Company had interest rate swaps associated with commercial loans with a notional value of $69.4 million and fair value of $1.3 million in other assets and $1.3 million in other liabilities at December 31, 2021. The difference in fair value of $5,000 between the asset and liability represents a credit valuation adjustment that flows through noninterest income.

In May 2021 the Company entered into derivative instruments designated as a cash flow hedge. For a derivative instrument that is designated and qualifies as a cash flow hedge, the change in fair value of the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

An interest rate swap with notional amount totaling $250 million as of December 31, 2021 was designated as a cash flow hedge to hedge the risk of variability in cash flows (future interest receipts) attributable to changes in the contractually specified LIBOR benchmark interest rate on the Company’s floating rate loan pool and was determined to be highly effective during the period. The Company is receiving a fixed rate of 1.437% and paying one month Libor. The maturity date of this interest rate swap is May 2031. The gross aggregate fair value of the swap of $854,000 is recorded in other assets in the Consolidated Balance Sheets at December 31, 2021, with changes in fair value recorded net of tax in other comprehensive income (loss). The Company expects the hedge to remain highly effective during the remaining terms of the swap.


	Twelve Months Ended December 31, 2021
	Amount of Gain (Loss) Recognized in OCI on Derivative		Total amount of Gain (Loss) on the Interest Rate Swap		Amount of Gain (Loss) Reclassified from OCI into Income
	(In Thousands)

Interest rate swap	$	674	$	854	$	1,716