Derivative Financial Instruments

9 Months Ended

Sep. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

17.Derivative Financial Instruments

Cash Flow Hedges

On April 4, 2025, the Company entered into a five-year pay-fixed interest rate swap agreement with a notional amount of $100 million which was scheduled to mature on April 4, 2030. The facility was discontinued on April 9, 2025, and a gain of $1.1 million was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, as a reduction of interest expense through maturity date of the contract.

On October 31, 2024, the Company entered into a ten year and four-month receive-fixed interest rate swap agreement with a notional amount of $100 million which was scheduled to mature on April 30, 2035. The facility was discontinued on March 4, 2025, and a gain of $456,000 was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, as a reduction of interest expense through maturity date of the contract.

On September 4, 2024, the Company entered into a five-year pay-fixed interest rate swap agreement with a notional amount of $100 million which was scheduled to mature on September 4, 2029. The facility was discontinued on October 4, 2024, and a gain of $755,000 was recognized by the Company. The gain is being accreted from other comprehensive income, net of deferred taxes, as a reduction of interest expense through maturity date of the contract.

On April 10, 2024, the Company terminated two five-year pay-fixed interest rate swap agreements with notional amounts of $100 million each which were scheduled to mature on December 6 and December 21, 2028, respectively. The termination resulted in a combined gain of $5.4 million. The gain is being accreted from other comprehensive income, net of deferred taxes, as a reduction of interest expense through the maturity date of the contracts.

For the nine months ended September 30, 2025 and 2024, approximately $1.9 million and $1.6 million, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. For the three months ended September 30, 2025 and 2024, approximately $646,000 and $596,000, respectively, was reclassified out of accumulated other comprehensive income and recognized as a reduction of interest expense on discontinued hedges. At September 30, 2025, the Company expected approximately $2.5 million of the unrealized gain to be reclassified as a reduction of interest expense over the next twelve month period.

Fair Value Hedges

The Company offers certain interest rate swap products directly to its qualified commercial banking customers. These financial instruments are not designated as hedging instruments. The interest rate swap derivative positions relate to transactions in which the Company enters into an interest rate swap with a customer, while at the same time entering into an offsetting interest rate swap with another financial institution. An interest rate swap transaction allows customers to effectively convert a variable rate loan to a fixed rate. In connection with each swap, the Company agrees to pay interest on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount.

Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts are designed to offset each other and would not significantly impact the Company’s operating results except in certain situations where there is a significant deterioration in the customer’s credit worthiness or that of the counterparties. At September 30, 2025, no such deterioration was determined by management.

The Company also offers one-way interest rate swap products to its customers. Under this type of arrangement, the Company extends a conventional fixed-rate loan to the borrower and then subsequently hedges the interest rate risk of that loan by entering into a swap for its own balance sheet to convert the fixed-rate loan to a synthetic floating rate asset. These types of swaps lock in the Company's spread over its cost of funds for the life of the loan.

For some of its loan participation facilities, the Company enters into RPAs with other banks in order to hedge or share a portion of the risk of borrower default related to the interest rate swap on a participated loan.

All derivatives are carried at fair value in either derivative assets or derivative liabilities in the accompanying consolidated balance sheets. At September 30, 2025, the Company's derivative assets and liabilities totaled $2.8 million and $3.5 million, respectively.

The following tables provide the outstanding notional balances and fair values of outstanding derivative positions at September 30, 2025 and December 31, 2024:

(Dollars in thousands)	Outstanding Notional  Balance		Asset  Derivative Fair Value		Liability  Derivative Fair Value		Pay Rate (1)	Receive Rate (1)	Remaining Term (2)
September 30, 2025
Fair value hedges:
Risk participation agreements purchased	$	4,790	$	8	$	—	—	7.48%		3.1
Risk participation agreements sold		117,793		—		—	—	3.92%		1.8
Commercial loan one-way interest rate swaps		77,466		12		738	6.94%	—		2.1
Commercial loan pass-through interest rate swaps:
Loan customer counterparty		172,577		1,504		1,279	—	6.45%		2.7
Financial institution counterparty		172,577		1,279		1,504	6.45%	—		2.7
Total fair value hedges		545,203		2,803		3,521
Total derivatives	$	545,203	$	2,803	$	3,521

December 31, 2024
Cash flow hedges:
Receive-fixed interest rate swap	$	100,000	$	—	$	2,161	USD Fed Funds-H.15	3.73%	10.3
Total cash flow hedges		100,000		—		2,161
Fair value hedges:
Risk participation agreements purchased		120,007		8		—	—	5.93%	1.7
Risk participation agreements sold		102,428		—		1	—	4.65%	2.7
Commercial loan one-way interest rate swaps		58,744		204		231	7.04%	—	2.6
Commercial loan pass-through interest rate swaps:
Loan customer counterparty		233,348		652		5,615	—	6.04%	2.7
Financial institution counterparty		233,348		5,615		652	6.04%	—	2.7
Total fair value hedges		747,875		6,479		6,499
Total derivatives	$	847,875	$	6,479	$	8,660

(1) Weighted average rate.

(2) Weighted average life (in years).