The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Interest rate swaps were entered into on April 13, 2017, January 1, 2020 and March 3, 2020 each with a respective notional amount of $25.0 million and were designated as a cash flow hedge of a Federal Home Loan Bank advance We are required to pay fixed-rates of interest ranging from 0.88% to 1.93% and receive variable rates of interest that reset quarterly based on three-month LIBOR. Expiration dates for the swaps range from January 2022 to April 2022. The swaps were determined to be fully effective during the period presented and therefore no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps.

In addition, during 2021, the Company entered into 9 forward starting pay fixed-rate interest rate swaps, with a total notional amount of $400 million, which are also designated as a cash flow hedge of a future Federal Home Loan Bank advance. We are required to pay fixed rates of interest ranging from 0.631% to 1.23% and receive variable rates of interest that reset quarterly based on the daily compounding secured overnight financing rate (“SOFR”). The forward starting swaps have commencing payment dates ranging from October 2021 to August 2022, with expiration dates ranging from December 2025 to March 2028.

Interest expense recorded on these swap transactions totaled approximately $(1.9) million, $(1.6) million, and $(0.7) million during 2021, 2020, and 2019 is reported as a component of interest expense on FHLB Advances.

The following table presents the net gains (losses), recorded in accumulated other comprehensive income and the Consolidated Statements of Income relating to the cash flow derivative instruments for the years ended December 31:

2021

(dollars in thousands)

Amount of gain

(loss) recognized

in OCI (Effective

Portion)

Amount of (gain)

loss reclassified

from OCI to

interest expense

Amount of gain (loss)

recognized in other

Noninterest income

(Ineffective Portion)

Interest rate contracts

3,593

1,873

2020

(dollars in thousands)

Amount of gain

(loss) recognized

in OCI (Effective

Portion)

Amount of (gain)

loss reclassified

from OCI to

interest expense

Amount of gain (loss)

recognized in other

Noninterest income

(Ineffective Portion)

Interest rate contracts

(3,423)

1,577

The following table reflects the cash flow hedges included in the Consolidated Statements of Condition as of December 31, 2021 and December 31, 2020:

	2021				2020
(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets/(liabilities):
Interest rate swaps related to FHLB Advances	$	475,000	$	3,347	$	175,000	$	(2,119)

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Table of Contents

CONNECTONE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 19 – Derivatives – (continued)

There were no net gains (losses) recorded in accumulated other comprehensive income or in the Consolidated Statement of Income relating to cash flow derivative instruments for the years ended December 31, 2021 and December 31, 2020.