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DERIVATIVE INSTRUMENTS
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS DERIVATIVE INSTRUMENTS
The Company enters into derivative instruments, which may include interest rate swaps and interest rate options, in connection with our risk-management activities. Our primary objective for using derivative financial instruments is to manage interest rate risk associated with our fixed-rate and variable-rate assets and liabilities.
Interest Rate Risk
We monitor our mix of fixed-rate and variable-rate assets and liabilities and may enter into interest rate swaps, forwards, and options to achieve a more desired mix of fixed-rate and variable-rate assets and liabilities. We execute these trades to modify our exposure to interest rate risk by converting certain fixed-rate instruments to a variable-rate and certain variable-rate instruments to a fixed-rate. We use a mix of both derivatives that qualify for hedge accounting treatment and economic hedges that do not qualify for hedge accounting treatment.
Derivatives qualifying for hedge accounting include fair value hedges and cash flow hedges. Fair value hedges include pay-fixed swaps of securities within our available-for-sale portfolio, and cash flow hedges include interest rate option contracts on certain securities within our available-for-sale portfolio, a portion of commercial and commercial real estate loans, and receive-fixed swaps of specific fixed-rate unsecured debt obligations and fixed-rate FHLB advances. Both the cash flow and fair value hedges were determined to be effective during all periods presented and the Company expects the hedges to remain effective during the remaining terms of the swaps.
We also enter into interest rate lock commitments and forward commitments that are executed as part of our mortgage business that do not meet the accounting definition of hedges, as well as interest rate swap contracts sold to commercial customers who wish to modify their interest rate sensitivity. These swaps are offset by contracts simultaneously purchased by the Company from other financial dealer institutions with mirror-image terms. Because of the mirror-image terms of the offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in the fair value subsequent to initial recognition have a minimal effect on earnings.
Balance Sheet Presentation
The following table summarizes the fair value of derivative instruments reported on our consolidated balance sheets. The amounts are presented on a gross basis, are segregated by derivatives that are designated and qualifying as hedging instruments or those that are not, and are further segregated by type of contract within those two categories. Derivative assets and derivative liabilities are included in other assets and accrued interest payable and other liabilities, respectively, on the consolidated balance sheets.
Notional amounts are reference amounts from which contractual obligations are derived and are not recorded on the balance sheet. In our view, derivative notional is not an accurate measure of our derivative exposure when viewed in isolation from other factors, such as market rate fluctuations and counterparty credit risk.
June 30, 2026December 31, 2025
Fair ValueFair Value
(dollars in thousands)AssetsLiabilitiesNotional amountAssetsLiabilitiesNotional amount
Derivatives designated as accounting hedges:
Interest rate contracts
Fair value hedges
Investment securities available for sale$1,621 $803 $182,645 $608 $2,901 $228,157 
Cash flow hedges
Investment securities available for sale323 — 90,000 754 — 90,000 
Pools of commercial and commercial real estate loans635 890 225,000 1,528 1,180 300,000 
FHLB advances, brokered CDs and other borrowings549 — 100,000 29 502 125,000 
Total derivatives designated as accounting hedges$3,128 $1,693 $597,645 $2,919 $4,583 $743,157 
Derivatives not designated as accounting hedges:
Interest rate contracts
Swaps$211 $211 $62,974 $395 $395 $52,637 
Interest rate lock commitments166 — 6,944 137 — 4,594 
Forward commitments to sell mortgage-backed securities39 — 9,725 — 21 9,179 
Total derivatives not designated as accounting hedges$416 $211 $79,643 $532 $416 $66,410 
The following table presents amounts recorded in the consolidated balance sheets related to cumulative basis adjustments for fair value hedges:
Carrying amount of the hedged itemsCumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items
(dollars in thousands)June 30, 2026December 31, 2025June 30, 2026December 31, 2025
Investment securities available for sale$169,641 $352,968 $818 $(2,293)
Statement of Income Presentation
The following table summarizes the effect of derivative instruments in fair value hedging relationships on the consolidated statements of income:
Location of gain (loss) recognized in income on derivativeGain (loss) recognized in income on derivativeLocation of gain (loss) recognized in income on related hedged itemGain (loss) recognized in income on related hedged items
(dollars in thousands)2026202520262025
Three Months Ended June 30,
Gain (loss) on fair value hedging relationships
Interest rate contracts
Fixed-rate mortgage-backed securitiesInterest income on investment securities available for sale$1,768 $(1,508)Interest income on investment securities available for sale$(1,774)$1,549 
Six Months Ended June 30,
Gain (loss) on fair value hedging relationships
Interest rate contracts
Fixed-rate mortgage-backed securitiesInterest income on investment securities available for sale$3,111 $(4,994)Interest income on investment securities available for sale$(2,933)$5,040 
The following table summarizes the effect of derivative instruments in cash flow hedging relationships on the consolidated statements of income:
Gain (loss) recognized in AOCI on derivativeLocation of gain (loss) recognized in income on derivativeGain (loss) reclassified from AOCI into income
(dollars in thousands)2026202520262025
Three Months Ended June 30,
Gain (loss) on cash flow hedging relationships
Interest rate contracts
Pools of commercial and commercial real estate loans$(553)$238 Interest income on loans$(110)$(741)
Investment securities available for sale(336)71 Interest income on investment securities available for sale(54)(5)
FHLB advances, brokered CDs and other borrowings372 (86)Interest expense(30)104 
Total gain (loss) on cash flow hedging relationships$(517)$223 $(194)$(642)
Six Months Ended June 30,
Gain (loss) on cash flow hedging relationships
Interest rate contracts
Pools of commercial and commercial real estate loans$(603)$1,355 Interest income on loans$(219)$(1,806)
Investment securities available for sale(431)517 Interest income on investment securities available for sale(108)82 
FHLB advances, brokered CDs and other borrowings1,022 (785)Interest expense(60)245 
FHLB advances, brokered CDs and other borrowings(154)— Noninterest expense(154)— 
Total gain (loss) on cash flow hedging relationships$(166)$1,087 $(541)$(1,479)
During the next 12 months, we estimate $1.4 million of losses will be reclassified into pre-tax earnings from derivatives designated as cash flow hedges.
The following table summarizes the effect of derivative instruments not designated as accounting hedges on the consolidated statements of income:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)Location of gain recognized in income on derivative2026202520262025
Gain (losses) on derivative instruments not designated as accounting hedges
Interest rate contractsResidential mortgage banking revenue$(120)$(11)$89 $59 
Total gain (loss) on derivative instruments not designated as accounting hedges$(120)$(11)$89 $59