v3.25.2
Derivative Instruments
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments
The Company manages economic risks, including interest rate, liquidity, and credit risk, by managing the amount, sources, and duration of its funding along with the use of interest rate derivative financial instruments, namely interest rate swaps. The Company does not use derivatives for speculative purposes. As of June 30, 2025, the Company was a party to one cash flow swap, designated as a hedging instrument, to add stability to interest expense and to manage its exposure to the variability of the future cash flows attributable to the contractually specified interest rate. The notional amount for the swap is $25 million and the Company has entered into a pay-fixed cash flow swap to convert rolling 90-day Federal Home Loan Bank advances or brokered deposits. Cash flow swaps with a positive fair value are recorded as other assets and cash flow swaps with a negative fair value are recorded as other liabilities on the Consolidated Balance Sheets.
The Company has one pay-fixed portfolio layer method fair value swap, designated as a hedging instrument, with a total notional amount of $150 million. The Company designated the fair value swap under the portfolio layer method (“PLM”). Under this method, the hedged item is designated as a hedged layer of a closed portfolio of financial loans that is anticipated to remain outstanding for the designated hedged period. Adjustments will be made to record the swap at fair value on the Consolidated Balance Sheets, with changes in fair value recognized in interest income. The carrying value of the fair value swap on the Consolidated Balance Sheets will also be adjusted through interest income, based on changes in fair value attributable to changes in the hedged risk.

The following table represents the carrying value of the portfolio layer method hedged asset and the cumulative fair value hedging adjustment included in the carrying value of the hedged asset as of June 30, 2025 and December 31, 2024:
June 30, 2025December 31, 2024June 30, 2025December 31, 2024
Carrying Value of Hedged AssetHedged Items
(In thousands)
Fixed Rate Asset (1)
$150,230 $150,250 $(20)$(665)

(1) These amounts include the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. As of June 30, 2025 and December 31, 2024, the amortized cost basis of the closed portfolio used in this hedging relationship was $504.1 million and $529.6 million, the cumulative basis adjustments associated with this hedging relationships was $0.1 million and $2.1 million, respectively. As of June 30, 2025 and December 31, 2024, the amount of the designated hedged item was $150.0 million, respectively.

As of June 30, 2025, the Company has interest rate swaps not designated as hedging instruments, to minimize interest rate risk exposure with loans to clients.

The Company accounts for all non-client related interest rate swaps as either effective cash flow or fair value swaps. None of the interest rate swap agreements contain any credit risk related contingent features. A hedging instrument is expected at inception to be highly effective at offsetting changes in the hedged transactions attributable to the changes in the hedged risk.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain loan clients. The Company executes interest rate swaps with commercial banking clients to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the client derivatives and the offsetting derivatives are recognized directly in earnings. 
Information about derivative instruments at June 30, 2025 and December 31, 2024 is as follows:


As of June 30, 2025
Derivative AssetsDerivative Liabilities
Original Notional AmountBalance Sheet LocationFair ValueOriginal Notional AmountBalance Sheet LocationFair Value
(In thousands)
Derivatives designated as hedging instruments:
Interest rate swap$25,000 Other assets$1,854 $— Accrued expenses and other liabilities$— 
Fair value swap$— Other assets$— $150,000 Accrued expenses and other liabilities$242 
Derivatives not designated as hedging instruments:
Interest rate swaps(1)
$38,500 Other assets$3,169 $38,500 Accrued expenses and other liabilities$3,169 

(1) Represents interest rate swaps with commercial banking clients, which are offset by derivatives with a third party.

Accrued interest receivables related to interest rate swaps as of June 30, 2025 totaled $0.1 million and is excluded from the fair value presented in the table above. The fair value of interest rate swaps in a net asset position, including accrued interest, totaled $1.8 million as of June 30, 2025.
As of December 31, 2024
Derivative AssetsDerivative Liabilities
Original Notional AmountBalance Sheet LocationFair ValueOriginal Notional AmountBalance Sheet LocationFair Value
(In thousands)
Derivatives designated as hedging instruments:
Interest rate swap$75,000 Other assets$3,259 $— Accrued expenses and other liabilities$— 
Fair value swap$— Other assets$— $150,000 Accrued expenses and other liabilities$259 
Derivatives not designated as hedging instruments:
Interest rate swaps(1)
$38,500 Other assets$4,213 $38,500 Accrued expenses and other liabilities$4,213 

(1) Represents interest rate swaps with commercial banking clients, which are offset by derivatives with a third party.

Accrued interest receivables related to interest rate swaps as of December 31, 2024 totaled $0.6 million and is excluded from the fair value presented in the table above. The fair value of interest rate swaps in a net asset position, including accrued interest, totaled $3.7 million as of December 31, 2024.
The effective portion of changes in the fair value of derivatives designated as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company expects to reclassify $0.3 million to reduce interest expense during the next 12 months.
The Company assesses the cash flow swaps hedge effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction. The Company does not offset derivative assets and derivative liabilities for financial statement presentation purposes.
The Company assesses the effectiveness of the fair value swap hedge with a regression analysis that compares the changes in forward curves to determine the value. The effective portion of changes in the fair value of derivatives designated as fair value hedges is recorded through interest income. The Company does not offset derivative assets and derivative liabilities for financial statement presentation purposes.
Changes in the consolidated statements of comprehensive income (loss) related to interest rate derivatives designated as hedges of cash flows were as follows for the three and six months ended June 30, 2025 and June 30, 2024:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2025202420252024
Interest rate swaps designated as cash flow hedges:
Unrealized (loss) gain recognized in accumulated other comprehensive income before reclassifications$(92)$548 $(614)$1,931 
Amounts reclassified from accumulated other comprehensive income(185)(1,257)(797)(2,514)
Income tax benefit on items recognized in accumulated other comprehensive income66 168 332 102 
Other comprehensive (loss)$(211)$(541)$(1,079)$(481)

The above unrealized gains and losses are reflective of market interest rates as of the respective balance sheet dates. Generally, a lower interest rate environment will result in a negative impact to comprehensive income whereas a higher interest rate environment will result in a positive impact to comprehensive income.

The following table summarizes the effect of the fair value hedging relationship recognized in the consolidated statements of income for the three and six months ended June 30, 2025 and June 30, 2024:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2025202420252024
(Loss) gain on fair value hedging relationship:
Hedged asset$(162)$(192)$(20)$(1,860)
Fair value derivative designated as hedging instrument202 610 104 1,772 
Total gain (loss) recognized in the consolidated statements of income within interest and fees on loans$40 $418 $84 $(88)


The following tables summarize gross and net information about derivative instruments that are offset in the Consolidated Balance Sheets at June 30, 2025 and December 31, 2024:
June 30, 2025
(In thousands)
Gross Amounts Not Offset in the Consolidated Balance Sheets
Gross Amounts of Recognized Assets(1)
Gross Amounts Offset in the Statement of Financial PositionNet Amounts of Assets presented in the Statement of Financial PositionFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivative assets$5,109 $— $5,109 $232 $4,877 $— 
(1) Includes accrued interest receivable totaling $86 thousand.
June 30, 2025
(In thousands)
Gross Amounts Not Offset in the Consolidated Balance Sheets
Gross Amounts of Recognized Liabilities(1)
Gross Amounts Offset in the Statement of Financial PositionNet Amounts of Liabilities presented in the Statement of Financial PositionFinancial InstrumentsCash Collateral PostedNet Amount
Derivative liabilities$3,450 $— $3,450 $232 $— $3,218 
(1) Includes accrued interest payable totaling $39 thousand.
December 31, 2024
(In thousands)
Gross Amounts Not Offset in the Consolidated Balance Sheets
Gross Amounts of Recognized Assets(1)
Gross Amounts Offset in the Statement of Financial PositionNet Amounts of Assets presented in the Statement of Financial PositionFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivative assets$8,040 $— $8,040 $234 $7,806 $— 
(1) Includes accrued interest receivable totaling $568 thousand.
December 31, 2024
(In thousands)
Gross Amounts Not Offset in the Consolidated Balance Sheets
Gross Amounts of Recognized Liabilities(1)
Gross Amounts Offset in the Statement of Financial PositionNet Amounts of Liabilities presented in the Statement of Financial PositionFinancial InstrumentsCash Collateral PostedNet Amount
Derivative liabilities$4,502 $— $4,502 $233 $— $4,269 
(1) Includes net interest payable totaling $30 thousand.