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 swaps 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 Swap Designated as Cash Flow Hedge: Interest rate swaps with a notional amount of $230.0 million and $270.0 million at December 31, 2021 and 2020, respectively, were designated as cash flow hedges of certain interest-bearing deposits. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of December 31, 2021, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income 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 terms of the swaps.

Information about the interest rate swaps designated as cash flow hedges as of December 31, 2021 and 2020 is presented in the following table:

(Dollars in thousands)	2021			2020
Notional amount	$	230,000		$	270,000
Weighted average pay rate		1.99	%		1.93	%
Weighted average receive rate		0.20	%		0.22	%
Weighted average maturity	1.04 years			2.02 years
Unrealized loss, net	$	(3,479	)	$	(9,616	)
Number of contracts		11			13

Net interest expense recorded on these swap transactions totaled approximately $4.4 million and $3.7 million for the years ended December 31, 2021 and 2020, respectively.

The following table presents the net gains/(losses) recorded in accumulated other comprehensive income and the consolidated financial statements relating to the cash flow derivative instruments for the year ended December 31:

(In thousands)	2021			2020
Interest rate contracts
Gain/(loss) recognized in other comprehensive income, net of tax (effective portion)	$	4,412		$	(4,412	)
Gain/(loss) reclassified from other comprehensive income to interest expense		—			(89	)
Gain/(loss) recognized in other noninterest income		(842	)		—

During the first quarter of 2020, the Company recognized an unrealized after-tax gain of $26,000 in accumulated other comprehensive income/(loss) related to the termination of three interest rate swaps designated as cash flow hedges. During the second quarter of 2019, the Company recognized an unrealized after-tax gain of $189,000 in accumulated other comprehensive income/(loss) related to the termination of four interest rate swaps designated as cash flow hedges. These

gains are being amortized into earnings over the remaining life of the terminated swaps. The Company recognized pre-tax interest income of $89,000 and $223,000 for the years ended December 31, 2020 and 2019, respectively, related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges.

During the second quarter of 2021, the Company terminated interest rate swaps with a notional amount of $40.0 million. The interest rate swaps were designated as cash flow hedges in which the Company received a variable payment from our counterparty in exchange for making fixed-rate payments over the life of the swap agreements. Due to increased liquidity levels, management made the decision to pay off certain interest-bearing deposit liabilities that were being hedged. These liabilities will not be replaced; therefore, it will no longer be probable that the original forecasted transactions subject to the cash flow hedges will occur. As a result, the pre-tax loss on the termination of the interest rate swaps of $842,000 was recorded in the income statement for the twelve months ended December 31, 2021.

The following tables reflect the cash flow hedges included in the financial statements as of December 31, 2021, and 2020:

	December 31, 2021
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	230,000	$	(3,479	)
Total included in other assets		—		—
Total included in other liabilities		230,000		(3,479	)

	December 31, 2020
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing deposits	$	270,000	$	(9,616	)
Total included in other assets		—		—
Total included in other liabilities		270,000		(9,616	)

Derivatives Not Designated as Accounting Hedges: The Company offers facility specific/loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution/swap counterparty (loan level / back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions.

The Company recorded a total swap valuation provision of $2.1 million for the year ended December 31, 2021 related to a commercial real estate loan placed on nonaccrual status during the third quarter of 2021. The Company also recorded a valuation allowance on our remaining swaps not designated as accounting hedges in the amount of $130,000 during the fourth quarter of 2021. The accrued interest receivable and payable of $4.8 million related to our swaps is recorded in other assets and other liabilities as of December 31, 2021.

(Dollars in thousands)	December 31, 2021			December 31, 2020
Notional amount	$	702,210		$	823,134
Fair value (A)	$	37,168		$	79,529
Weighted average pay rates		4.00	%		4.02	%
Weighted average receive rates		1.83	%		1.91	%
Weighted average maturity	5.5 years			6.5 years
Number of contracts		86			95