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Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Risk Management Objective of Using Derivatives
The Corporation is exposed to certain risk arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Corporation enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash receipts and its known or expected cash payments principally related to the Corporation’s loan portfolio.
Interest Rate Swaps
The Corporation uses interest rate swap agreements to modify interest rate characteristics from variable to fixed or fixed to variable in order to reduce the impact of interest rate changes on future net interest income. The Corporation’s credit exposure on interest rate swaps includes changes in fair value and any collateral that is held by a third party.
In June 2023 the Corporation entered into three interest rate swaps classified as cash flow hedges with notional amounts of $25 million each, to hedge the interest payments paid on short term borrowings. Under the terms of the three swap agreements, the Corporation pays average fixed rates of 4.070%, 4.027% and 4.117%, and receives variable rates in return indexed to SOFR. The swaps mature between May, June, and December 2026. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and performs an assessment on a recurring basis and determined that the derivative currently is and is expected to be highly effective in offsetting changes in cash flows of the hedged item. For the three months ended March 31, 2026, and 2025, approximately $122 thousand and $192 thousand, net of tax, is recorded in total comprehensive income as an unrealized gain and an unrealized loss, respectively. These amounts could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to March 31, 2026. At March 31, 2026 and December 31, 2025, the combined notional amount of the interest rate swaps was $75 million and $75 million, respectively, and the fair value was a liability of $123 thousand and $281 thousand, respectively.
In August 2024 the Corporation entered into an interest rate swap classified as a fair value hedge with a notional amount of $40 million, to hedge the interest payments received on a pool of residential mortgage loans held in portfolio. Under the terms of the swap agreement, the Corporation pays an average fixed rate of 3.60% and receives a variable rate in return indexed to SOFR. The swap matures August 2027. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and performs an assessment on a recurring basis and determined that the derivative currently is and is expected to be highly effective in offsetting changes in fair value of the hedged item. For the three months ended March 31, 2026, approximately $8 thousand, net of tax, is recorded as a fair values adjustment. These amounts could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to March 31, 2026.
Mortgage Banking Derivatives
In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation may enter into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans or interest rate locks at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Interest rate lock commitments and forward commitments are recorded within other assets/liabilities on the consolidated balance sheets, with changes in fair values during the period recorded within net change in the fair value of derivative instruments on the consolidated statements of income.
Customer Derivatives
Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers to swap a fixed rate product for a variable rate product, or vice versa. The Corporation executes interest rate derivatives with commercial banking customers to facilitate their respective risk management strategies. Those interest rate derivatives are simultaneously hedged by offsetting derivatives that the Corporation executes with a third party, such that the Corporation minimizes its net interest rate 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 customer derivatives and the offsetting derivatives are recognized directly in earnings.
The following table presents a summary of notional amounts and fair values of derivative financial instruments at the dates indicated:
March 31, 2026December 31, 2025
(dollars in thousands)Balance Sheet Line ItemNotional AmountAsset (Liability) Fair ValueNotional AmountAsset (Liability) Fair Value
Interest Rate Lock Commitments
Positive fair valuesOther assets$60,047 $355 $40,370 $402 
Negative fair valuesOther liabilities27,761 (169)2,735 (13)
Total$87,808 $186 $43,105 $389 
Forward Commitments
Positive fair valuesOther assets$13,000 $130 $— $— 
Negative fair valuesOther liabilities4,500 (13)8,000 (32)
Total$17,500 $117 $8,000 $(32)
Customer Derivatives - Interest Rate Swaps
Positive fair valuesOther assets$53,413 $1,728 $53,954 $1,909 
Negative fair valuesOther liabilities53,413 (1,745)53,954 (1,929)
Total$106,826 $(17)$107,908 $(20)
Customer Derivatives - Risk Participation Agreements
Positive fair valuesOther assets$— $— $— $— 
Negative fair valuesOther liabilities29,434 (22)24,166 (23)
Total$29,434 $(22)$24,166 $(23)
Fair Value Hedge
Positive fair valuesOther assets$40,000 $13 $40,000 $21 
Negative fair valuesOther liabilities— — — — 
Total$40,000 $13 $40,000 $21 
Interest Rate Swaps
Positive fair valuesOther assets$— $— $— $— 
Negative fair valuesOther liabilities75,000 (123)75,000 (281)
Total$75,000 $(123)$75,000 $(281)
Total derivative financial instruments$356,568 $154 $298,179 $54 
Interest rate lock commitments are considered Level 3 in the fair value hierarchy, while the forward commitments and interest rate swaps are considered Level 2 in the fair value hierarchy.
The following table presents a summary of the net change in the fair value of derivative instruments:
Three months ended
March 31,
(dollars in thousands)20262025
Interest Rate Lock Commitments$(203)$102 
Forward Commitments149 (30)
Customer Derivatives - Interest Rate Swaps3 (33)
Customer Derivatives - Risk Participation Agreements1 80 
Net change in the fair value of derivative instruments$(50)$119 
Net realized gains on derivative hedging activities were $18 thousand for the three months ended March 31, 2026, and net realized gains of $21 thousand for the three months ended March 31, 2025, and are included in non-interest income in the consolidated statements of income.