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 Company's consolidated balance sheets, depending on their position.

For derivative instruments that are designated as hedging instruments, the effective portion of the changes in the fair value of the derivative is reported in AOCI, net of tax, until the hedged cash flows impact earnings. Any ineffective portion of the hedge is immediately recognized 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.

At December 31, 2025, the Company had $1.1 million in forward sale commitments outstanding. At December 31, 2024, the Company had $4.9 million in forward sale commitments outstanding.

The Company did not have any interest rate lock commitments outstanding as of December 31, 2025. At December 31, 2024, the Company had $0.5 million interest rate lock commitments outstanding.

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 the Company as 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.

The Company had RPAs with total notional amounts of $52.4 million and $35.2 million as of December 31, 2025 and 2024, respectively. The fair value of the RPAs was insignificant to the Consolidated Financial Statements as of December 31, 2025 and 2024.

The Company has established a program in which it originates variable-rate loan and simultaneously enters into a 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 December 31, 2025 and 2024, the Company has entered into swaps agreements with borrowers totaling $60.7 million and $50.2 million in notional amounts, respectively. These were offset by swap agreements with third-party financial institutions for the same notional amounts of $60.7 million and $50.2 million, respectively. As of December 31, 2025 and 2024, the Company received $6.6 million and $12.9 million, respectively, in counter-party cash collateral related to the back-to-back swap agreements.

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.

In 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 as of December 31, 2025. All other terms of the interest rate swap remained unchanged.

The interest rate swap is carried at its fair value on the Company’s consolidated balance sheets, recorded in other assets, if the fair value is positive, or in 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 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 December 31, 2025, the hedge was determined to be highly effective, and the Company expects the hedge to remain effective for the duration of the swap.


		Asset Derivatives				Liability Derivatives
Derivatives Not Designated as	Balance Sheet	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Hedging Instruments	Location	December 31, 2025		December 31, 2024		December 31, 2025		December 31, 2024
		(Dollars in thousands)
Interest rate lock and forward sale commitments	Other assets / other liabilities	$	—	$	46	$	4	$	4
Risk participation agreements	Other assets / other liabilities	—		—		3		—
Back-to-back swap agreements	Other assets / other liabilities	3,045		3,840		3,045		3,840

Asset Derivatives

Liability Derivatives

Derivatives Designated as

Balance Sheet

Fair Value at

Hedging Instruments

Location

December 31, 2025

December 31, 2024

December 31, 2025

December 31, 2024

(Dollars in thousands)

Interest rate swap

Other assets / other liabilities

4,163

8,382

—

Derivatives Not in Cash Flow Hedging Relationship

Location of Gain (Loss) Recognized in Earnings on Derivatives

Amount of Gain (Loss) Recognized in Earnings on Derivatives

(Dollars in thousands)

Year ended December 31, 2025

Interest rate lock and forward sale commitments

Mortgage banking income

(47)

Loans held for sale

Other income

Risk participation agreements

Other expense

(3)

Back-to-back swap agreements

Other service charges and fees

225

Year ended December 31, 2024

Interest rate lock and forward sale commitments

Mortgage banking income

Loans held for sale

Other income

(78)

Back-to-back swap agreements

Other service charges and fees

Year ended December 31, 2023

Interest rate lock and forward sale commitments

Mortgage banking income

(42)

Loans held for sale

Other income

Back-to-back swap agreements

Other service charges and fees

Derivatives in Cash Flow Hedging Relationship

Location of Gain (Loss) Recognized in Earnings on Derivatives

Amount of Gain (Loss) Recognized in Earnings on Derivatives

(Dollars in thousands)

Year ended December 31, 2025

Interest rate swap

Interest income

2,684

Year ended December 31, 2024

Interest rate swap

Interest income

2,563

Year ended December 31, 2023

Interest rate swap

Interest income

(37)

The following table presents the amounts recorded on the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of the periods presented:


Line Item in the Consolidated Balance Sheets
(dollars in thousands)	December 31, 2025		December 31, 2024
Investment securities, available-for-sale:
Carrying Amount of the Hedged Assets	$	92,517	$	88,777
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets	(4,385)		(8,805)