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 and the use of derivative financial instruments. 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 also enters into interest rate derivatives to accommodate the business requirements of certain qualifying customers. All derivatives are recognized as other assets or other liabilities on the Company's Consolidated Statements of Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation.

The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the


Line Item in the Statement of Financial Position in Which the Hedged Item is Included	Carrying Amount of the Hedged Assets/(Liabilities)	Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)	Carrying Amount of the Hedged Assets/(Liabilities)	Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
	9/30/2024	9/30/2024	12/31/2023	12/31/2023
Fixed Rate Loans1	$149,734	$(266)	$148,633	$(1,367)
Total	$149,734	$(266)	$148,633	$(1,367)
1 These amounts include the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2024 and 12/31/2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $721.9 million and $763.4 million respectively; the cumulative basis adjustments associated with these hedging relationships was $0.3 million and $1.4 million, respectively; and the amounts of the designated hedged items were $150.0 million for both periods.

The Company enters into interest rate swaps to help commercial loan borrowers manage their interest rate risk. These interest rate swap contracts allow borrowers to convert variable-rate loan payments to fixed-rate loan payments. When the Company enters into an interest rate derivative contract with a commercial loan borrower, it simultaneously enters into a “mirror” interest rate contract with a third party. For interest rate swaps, the third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments. The Company's credit policies with respect to interest rate contracts with commercial borrowers are similar to those used for loans. The Company retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans. The interest rate contracts with counterparties are generally subject to bilateral collateralization terms. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

The Company has entered into risk participation agreements with other banks in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

The tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated statements of condition as of September 30, 2024 and December 31, 2023. Amounts below are presented on a net basis in accordance with applicable accounting guidance.


Derivative Assets
	September 30, 2024
(In thousands)	Notional Amount		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest Rate Products	$	150,000	Other Assets	$	362

Total derivatives designated as hedging instruments				$	362

Derivatives not designated as hedging instruments
Interest Rate Products	$	150,475	Other Assets	$	4,452
Risk Participation Agreement	0		Other Assets	0
Total derivatives not designated as hedging instruments				$	4,452


Derivative Assets
	December 31, 2023
(In thousands)	Notional Amount		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest Rate Products	$	150,000	Other Assets	$	1,503

Total derivatives designated as hedging instruments				$	1,503

Derivatives not designated as hedging instruments
Interest Rate Products	$	34,930	Other Assets	$	1,610
Risk Participation Agreement	0		Other Assets	0
Total derivatives not designated as hedging instruments				$	1,610


Derivative Liabilities
	September 30, 2024
(In thousands)	Notional Amount		Balance Sheet Location	Fair Value
Derivatives not designated as hedging instruments
Interest Rate Products	$	150,475	Other Liabilities	$	4,843
Risk Participation Agreement	18,963		Other Liabilities	37
Total derivatives not designated as hedging instruments				$	4,880


Derivative Liabilities
	December 31, 2023
(In thousands)	Notional Amount		Balance Sheet Location	Fair Value
Derivatives not designated as hedging instruments
Interest Rate Products	$	34,930	Other Liabilities	$	1,778
Risk Participation Agreement	7,542		Other Liabilities	48
Total derivatives not designated as hedging instruments				$	1,826


The Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income
	Location of Gain or (Loss) Recognized in Income on Derivative
	Three Months Ended
	9/30/2024		9/30/2023
(In thousands)	Interest Income
Total amounts of income and expense line items presented in the statement of financial performance in which the effects of fair value or cash flow hedges are recorded	$	675	$	647
The effects of fair value and cash flow hedging:
Gain or (loss) on fair value hedging relationships in Subtopic 815-20
Interest contracts
Hedged items	2,114		(555)
Derivatives designated as hedging instruments	(1,439)		1,202


The Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income
	Location of Gain or (Loss) Recognized in Income on Derivative
	Nine Months Ended
	9/30/2024		9/30/2023
(In thousands)	Interest Income
Total amounts of income and expense line items presented in the statement of financial performance in which the effects of fair value or cash flow hedges are recorded	$	2,010	$	952
The effects of fair value and cash flow hedging:
Gain or (loss) on fair value hedging relationships in Subtopic 815-20
Interest contracts
Hedged items	1,101		(3,875)
Derivatives designated as hedging instruments	909		4,827


Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivative		Amount of Gain or (Loss) Recognized in Income on Derivative
		Three Months Ended
(In thousands)		9/30/2024		9/30/2023

Interest Rate Products	Other Income	$	(259)	$	(2)
Risk Participation Agreement	Other Income	(18)		12
Total		$	(277)	$	10

Fee Income	Other income	$	791	$	70


Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivative		Amount of Gain or (Loss) Recognized in Income on Derivative
		Nine Months Ended
(In thousands)		9/30/2024		9/30/2023

Interest Rate Products	Other Income	$	(223)	$	(2)
Risk Participation Agreement	Other Income	61		14
Total		$	(162)	$	12

Fee Income	Other income	$	1,175	$	70

The Company has agreements with each of its derivative counterparties that contain a provision where 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 September 30, 2024 and December 31, 2023, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $4.9 million and $1.8 million, respectively. As of September 30, 2024 and December 31, 2023, the Company had posted $4.4 million and $1.5 million, respectively, in collateral related to these agreements. The interest rate hedge counterparty has posted $0 and $1.5 million of collateral in proportion to potential losses in the derivative position at September 30, 2024 and December 31, 2023, respectively.