XML 31 R20.htm IDEA: XBRL DOCUMENT v3.26.1
DERIVATIVES
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES DERIVATIVES
The Company periodically enters into 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.
Cash Flow Hedges: In 2023, the Company executed an interest rate swap with a notional amount that was designated as a cash flow hedge of certain FHLB borrowings. The swap hedges the benchmark index (SOFR) with a receive float/pay fixed swap for the period March 21, 2023 through April 1, 2026. The notional amount of this interest rate swap as of March 31, 2026 and December 31, 2025 was $50.0 million. As of March 31, 2026 and December 31, 2025, this hedge was determined to be effective, and the Company expects the hedge to remain effective during the remaining terms of the swap. Upon maturity on April 1, 2026, the interest rate swap was not renewed as the $50.0 million FHLB advance that matured on April 1, 2026 was not renewed.
In 2025, the Company executed interest rate swaps with notional amounts that were designated as cash flow hedges of certain variable rate interest-bearing deposits. The swaps hedge the benchmark index (Federal funds) with a receive float/pay fixed swap with various maturities over a four-year period and total notional amount of $200.0 million as of March 31, 2026. As of March 31, 2026, these hedges were determined to be effective, and the Company expects the hedge to remain effective during the remaining terms of the contracts.
Fair Value Hedges: In 2025, the Company entered into interest rate swaps with notional amounts that were designated as fair value hedges of closed pools of fixed-rate loans. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to offset changes in the fair value of the hedged item. The swap hedges the benchmark index (Federal funds) with a receive float/pay fixed swap with various maturities over a five-year period and total notional amount of $200.0 million as of March 31, 2026. As of March 31, 2026, this hedge was determined to be effective, and the Company expects the hedge to remain effective during the remaining terms of the contracts.
Derivatives Not Designated as Hedges: The Company periodically enters into interest rate swaps to offset interest rate exposure with its commercial and residential variable rate loan clients. Clients with variable rate loans may choose to enter into an interest rate swap to hedge the interest rate risk on the loan and effectively pay a fixed rate payment. The Company will simultaneously enter into an interest rate swap on the same underlying loan and notional amount to hedge risk on the fixed rate loan. The notional amount of interest rate swaps with its loan customers as of March 31, 2026 and December 31, 2025 was $60.9 million and $70.7 million, respectively. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.
The Company presents derivative position gross on the balance sheet. The following reflects the fair value of derivatives recorded on the Condensed Consolidated Balance Sheets as of the dates noted:
As of March 31, 2026As of December 31, 2025
(dollars in thousands)
Notional AmountFair ValueNotional AmountFair Value
Included in other assets:
Derivatives designated as hedges:
Interest rate swaps – cash flow hedge$250,000 $500 $— $— 
Interest rate swaps – fair value hedge200,000 444 — — 
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans60,882 692 70,703 952 
Total included in other assets$1,636 $952 
Included in other liabilities:
Derivatives designated as hedges:
Interest rate swaps – cash flow hedge$— $— $250,000 $777 
Interest rate swaps – fair value hedge— — 200,000 719 
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans60,882 718 70,703 976 
Total included in other liabilities$718 $2,472 
The effect of cash flow hedge accounting on accumulated other comprehensive income were as follows:
Three Months Ended March 31,
20262025
(dollars in thousands)Location of Gain (Loss) Reclassified from OCI into IncomeAmount of Gain (Loss) Recognized in OCI on DerivativeAmount of Gain (Loss) Reclassified from OCI into IncomeAmount of Gain (Loss) Recognized in OCI on DerivativeAmount of Gain (Loss) Reclassified from OCI into Income
Interest rate swap - FHLB borrowings
Interest expense - Other borrowed funds$(5)$(24)$(25)$59 
Interest rate swaps - Variable rate deposits
Interest expense - Deposits1,081 125 — — 
$1,076 $101 $(25)$59 
The following amounts were recorded on the Condensed Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges for the respective period (dollars in thousands):
March 31, 2026
Condensed Consolidated Balance Sheet line itemAmortized Cost of the Hedged AssetsAmortized Cost of Fair Value Hedging Included in the Carrying Amount of the Hedged Assets
Loans$431,108 $(420)
The effects of the fair value hedge relationships on the Condensed Consolidated Statements of Income were as follows:
Three Months Ended March 31,
(dollars in thousands)Location of Gain (Loss)20262025
Interest rate swapInterest income - Loans$553 $— 
LoansInterest income - Loans(420)— 
The effect of derivatives not designated as hedging instruments recorded in Other non-interest income on the Condensed Consolidated Statements of Income for the three months ended March 31, 2026 and 2025 was immaterial.