v3.26.1
Derivatives and Hedging Activities
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company 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 Company 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 Company also enters into interest rate derivatives to accommodate the business requirements of certain qualifying customers. All derivatives are recognized as other assets or other liabilities on the Company's Consolidated Statements of Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation.
Derivatives Designated as Hedging Instruments
Fair Value Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. As of June 30, 2026, the Company had no outstanding interest rate swaps.
For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.
As of June 30, 2026 and December 31, 2025, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges.
Line Item in the Statement of Financial Position in Which the Hedged Item is IncludedCarrying Amount of the Hedged Assets/(Liabilities)Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities) Carrying Amount of the Hedged Assets/(Liabilities)Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
06/30/202606/30/202612/31/202512/31/2025
Fixed Rate Loans1
$0$0$49,962$(38)
Total$0$0$49,962$(38)
1These 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. At June 30, 2026 and December 31, 2025, the amortized cost basis of the closed portfolios used in these hedging relationships was $0 and $658.5 million respectively; the cumulative basis adjustments associated with these hedging relationships was $0 and $38,000, respectively; and the amounts of the designated hedged items were $0 and $100.0 million respectively.
Derivatives Not Designated as Hedging Instruments
The Company enters into interest rate swaps to help commercial loan borrowers manage their interest rate risk. These interest rate swap contracts allow borrowers to convert variable-rate loan payments to fixed-rate loan payments. When the Company enters into an interest rate derivative contract with a commercial loan borrower, it simultaneously enters into a “mirror” interest rate contract with a third party. For interest rate swaps, the third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments. The Company's credit policies with respect to interest rate contracts with commercial borrowers are similar to those used for loans. The Company retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans. The interest rate contracts with counterparties are generally subject to bilateral collateralization terms. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.
The Company has entered into risk participation agreements with other banks in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.
Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.
Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Statements of Condition
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated statements of condition as of June 30, 2026 and December 31, 2025. Amounts below are presented on a net basis in accordance with applicable accounting guidance.
(In thousands)Notional AmountFair ValueNotional AmountFair Value
June 30, 2026December 31, 2025
Derivative Assets
Derivatives designated as hedging instruments
Interest Rate Products$0 $0 $50,000 $33 
Total derivatives designated as hedging instruments$0 $33 
Derivatives not designated as hedging instruments
Interest Rate Products$267,284 $2,240 $249,273 $5,032 
Total derivatives not designated as hedging instruments$2,240 $5,032 
 Derivative Liabilities
Derivatives not designated as hedging instruments
Interest Rate Products$267,284 $2,445 $249,273 $5,312 
Risk Participation Agreement57,785 61 64,282 77 
Total derivatives not designated as hedging instruments $2,506 $5,389 
Tabular Disclosure of the Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income
The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of income for the three and six months ended June 30, 2026 and 2025:
The Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income
Location of Gain or (Loss) Recognized in Income on Derivative
Three Months EndedSix Months Ended
06/30/202606/30/202506/30/202606/30/2025
(In thousands)Interest IncomeInterest Income
Total amounts of income and expense line items presented in the statement of financial performance in which the effects of fair value or cash flow hedges are recorded$30 $247 $61 $540 
The effects of fair value and cash flow hedging:
Gain or (loss) on fair value hedging relationships in Subtopic 815-20
Interest contracts
Hedged items30 158 38 498 
Derivatives designated as hedging instruments0 89 23 42 
Tabular Disclosure of the Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income
The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the consolidated statements of income for the three and six months ended June 30, 2026 and 2025:
Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Income
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20 Location of Gain or (Loss) Recognized in Income on DerivativeAmount of Gain or (Loss) Recognized in Income on DerivativeAmount of Gain or (Loss) Recognized in Income on Derivative
(In thousands)06/30/202606/30/2025
Three Months Ended
Interest Rate ProductsOther Income$83 $(82)
Risk Participation AgreementOther Income20 9 
Total$103 $(73)
Fee Income Other income $178 $228 
Six Months Ended
Interest Rate ProductsOther Income$75 $(194)
Risk Participation AgreementOther Income16 34 
Total$91 $(160)
Fee IncomeOther income $236 $257 
Credit-risk-related Contingent Features
Applicable for OTC derivatives with dealers
The Company's agreements with each of its derivative counterparties contain cross default provisions that provide that the Company could be declared in default on its derivative obligations if the Company defaults on any of its indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender.
As of June 30, 2026 and December 31, 2025, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $1.8 million and $5.3 million, respectively. As of June 30, 2026 and December 31, 2025, the Company had posted $1.6 million and $1.9 million, respectively, in collateral related to these agreements.