The Company utilizes both designated and undesignated derivative financial instruments to manage exposure to interest rate fluctuations. All derivatives are measured at fair value and reported in other assets or other liabilities on the consolidated balance sheets, depending on their position.

For derivative instruments that are designated as cash flow hedging instruments, the effective portion of the changes in the fair value of the derivative is recorded in accumulated other comprehensive income (loss) ("AOCI"), net of tax, until the hedged cash flows impact earnings. Any ineffective portion of the hedge is immediately recognized in current period earnings.

For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivative are included in current period earnings.

Derivative financial instruments are subject to credit and counterparty risk, which is defined as the risk of financial loss if a borrower or counterparty is either unable or unwilling to repay borrowings or settle transactions in accordance with the underlying contractual terms. Credit and counterparty risks associated with derivative financial instruments are similar to those relating to traditional financial instruments. The Company manages derivative credit and counterparty risk by evaluating the creditworthiness of each borrower or counterparty, and requiring collateral where appropriate.

The Company enters into interest rate lock commitments on certain mortgage loans that are intended to be sold. To manage interest rate risk on interest rate lock commitments, the Company also enters into forward loan sale commitments on the loans that are intended to be sold. The interest rate lock and forward loan sale commitments are accounted for as undesignated derivatives and are recorded at their respective fair values in other assets and other liabilities, with changes in fair value recorded in current period earnings. These instruments serve to reduce the Company's exposure to movements in interest rates.

As of September 30, 2025, the Company had no interest rate lock commitments outstanding. The Company had $0.5 million in interest rate lock commitments outstanding as of December 31, 2024.

As of September 30, 2025, the Company had $1.6 million forward sale commitments outstanding. The Company had $4.9 million in forward sale commitments outstanding as of December 31, 2024.

The Company may enter into credit risk participation agreements ("RPA") with financial institution counterparties related to interest rate swaps on participation loans. The RPAs entered into by us and a participant bank provide credit protection to the

financial institution counterparties should the borrowers fail to perform on their interest rate derivative contracts with the financial institutions.

RPAs are accounted for as undesignated derivatives and are measured at fair value, with changes in fair value recorded in current period earnings.

The Company had RPAs with total notional amounts of $51.4 million and $35.2 million as of September 30, 2025 and December 31, 2024, respectively. The fair value of the RPAs was insignificant to the consolidated financial statements as of September 30, 2025 and December 31, 2024.

The Company has established a program in which it originates variable-rate loans and simultaneously enters into variable-to-fixed interest rate swaps with borrowers. To offset interest rate exposure, the Company also enters into equal and opposite swap agreements with third-party financial institutions. These back-to-back swap agreements are designed to economically offset each other, allowing the Company to maintain a variable rate loan while providing the borrower with fixed-rate payments.

The Company's net cash flow from these arrangements equals the interest income earned on the variable-rate loan. These back-to-back swap agreements are considered free-standing derivatives and are recorded at fair value in either other assets or other liabilities on the Company's consolidated balance sheet. Changes in fair value are recognized in current period earnings.

As of September 30, 2025, the Company had entered into swap agreements with borrowers totaling $61.1 million in notional amount, compared to $50.2 million as of December 31, 2024. These were offset by swap agreements with third-party financial institutions for the same notional amounts. The Company received $7.9 million and $12.9 million in counter-party cash collateral related to the back-to-back swap agreements as of September 30, 2025 and December 31, 2024, respectively.

To mitigate interest rate risk, the Company entered into a forward starting interest rate swap during the first quarter of 2022, with a notional amount of $115.5 million, designated as a fair value hedge of certain municipal debt securities. Under the terms of the swap, the Company pays a fixed rate of 2.095% and receives a floating rate based on the Federal Funds effective rate. The fair value hedge became effective on March 31, 2024, and matures on March 31, 2029.

During the second quarter of 2025, a $1.0 million municipal debt security underlying the hedge was called, resulting in a partial termination of the interest rate swap and a reduction of the notional amount to $114.6 million. All other terms of the interest rate swap remained unchanged.

The interest rate swap is carried at fair value on the Company’s consolidated balance sheet, recorded in other assets (if the fair value is positive) or other liabilities (if the fair value is negative). The changes in the fair value of the interest rate swap are recognized in interest income. Unrealized gains or losses on the hedged municipal securities, attributable to changes in benchmark interest rates, are recorded as adjustments to the carrying value of the hedged debt securities and offset in the same interest income line item.

The Company uses the long-haul method to assess hedge effectiveness, which is a statistical regression analysis that consists of historical observations of prior period periodic changes in fair value of both the hedge and the hedged item. The assessment is based on the Federal Funds benchmark interest rate component of the hedged item only with changes in credit unhedged. The assessment is performed on a quarterly basis. As of September 30, 2025, the hedge was determined to be highly effective, and the Company expects the hedge to remain effective for the duration of the swap.

During the three months ended September 30, 2025 and 2024, the Company recorded $0.7 million and $1.1 million, respectively, in interest income on taxable investment securities related to the swap. For the nine months ended September 30, 2025 and 2024, the Company recorded $2.1 million and $1.9 million, respectively, in interest income from the swap.

The following tables present the location of all assets and liabilities associated with our derivative instruments within the consolidated balance sheets as of the dates presented:


Derivative Financial Instruments Not Designated as Hedging Instruments		Asset Derivatives				Liability Derivatives
		Fair Value at				Fair Value at
(dollars in thousands)	Balance Sheet Location	September 30, 2025		December 31, 2024		September 30, 2025		December 31, 2024
Interest rate lock and forward sale commitments	Other assets / other liabilities	$	—	$	46	$	16	$	4


Risk participation agreements	Other assets / other liabilities	—		—		3		—
Back-to-back swap agreements	Other assets / other liabilities	3,123		3,840		3,123		3,840

Derivative Financial Instruments Designated as Hedging Instruments

Asset Derivatives

Liability Derivatives

Fair Value at

(dollars in thousands)

Balance Sheet Location

September 30,
2025

December 31,
2024

September 30,
2025

December 31,
2024

Interest rate swap

Other assets / other liabilities

4,344

8,382

—

The following tables present the impact of derivative instruments and their location within the consolidated statements of income for the periods presented:

Derivative Financial Instruments
Not Designated as Hedging Instruments

Location of Gain (Loss)
Recognized in
Earnings on Derivatives

Amount of Gain (Loss)
Recognized in
Earnings on Derivatives

(dollars in thousands)

Three Months Ended September 30, 2025

Interest rate lock and forward sale commitments

Mortgage banking income

(16)

Back-to-back swap agreements

Other service charges and fees

Three Months Ended September 30, 2024

Interest rate lock and forward sale commitments

Mortgage banking income

Loans held for sale

Other income