v3.26.1
Note 9 - Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS

 

Customer Derivatives – Interest Rate Swaps

 

The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC Topic 815 “Derivatives and Hedging,” and changes in fair value are recognized in other operating income. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there  may be fair value adjustments related to credit quality variations between counterparties, which  may impact earnings as required by FASB ASC Topic 820 “Fair Value Measurement” (“ASC 820”). The Company did not recognize any gains or losses in other operating income resulting from fair value adjustments of these swap agreements during the three and six months ended June 30, 2026 and 2025.

 

The table below presents the notional amounts and fair values of the Company’s derivative financial instruments as well as their classification on the accompanying consolidated balance sheets at  June 30, 2026 and  December 31, 2025 (dollars in thousands).

 

      

Fair Value

 
  

Notional(1)

  

Derivative Assets(2)

  

Derivative Liabilities(2)

 

June 30, 2026

            

Interest rate swaps

 $316,692  $11,528  $11,528 
             

December 31, 2025

            

Interest rate swaps

 $361,564  $11,660  $11,660 

 

(1)At  June 30, 2026 the Company had notional amounts of $158.3 million in interest rate swap contracts with customers and $158.3 million in offsetting interest rate swap contracts with other financial institutions. At  December 31, 2025 the Company had notional amounts of $180.8 million in interest rate swap contracts with customers and $180.8 million in offsetting interest rate swap contracts with other financial institutions.
(2)Derivative assets and liabilities are reported at fair value in “Other assets” and “Accrued taxes and other liabilities,” respectively, in the accompanying consolidated balance sheets.

 

The table below presents the gross presentation, the effects of offsetting, and a net presentation of the Company’s derivative financial instruments and securities sold under agreements to repurchase at  June 30, 2026 and  December 31, 2025 (dollars in thousands).

 

              

Gross Amounts Not Offset in the Consolidated Balance Sheets

     
  

Gross Amounts Recognized

  

Gross Amounts Offset in the Consolidated Balance Sheets

  

Net Amounts Presented in the Consolidated Balance Sheets

  

Financial Instruments

  

Cash Collateral(1)

  

Net Amount

 

June 30, 2026

                        

Financial assets:

                        

Interest rate swaps

 $11,528  $—  $11,528  $—  $(10,115) $1,413 

Total

 $11,528  $—  $11,528  $—  $(10,115) $1,413 
                         

Financial liabilities:

                        

Interest rate swaps

 $11,528  $—  $11,528  $—  $—  $11,528 

Repurchase agreements

  18,575   —   18,575   (16,447)  —   2,128 

Total

 $30,103  $—  $30,103  $(16,447) $—  $13,656 
                         

December 31, 2025

                        

Financial assets:

                        

Interest rate swaps

 $11,660  $—  $11,660  $—  $(8,729) $2,931 

Total

 $11,660  $—  $11,660  $—  $(8,729) $2,931 
                         

Financial liabilities:

                        

Interest rate swaps

 $11,660  $—  $11,660  $—  $—  $11,660 

Repurchase agreements

  11,183   —   11,183   (11,183)  —   — 

Total

 $22,843  $—  $22,843  $(11,183) $—  $11,660 

 

(1)The Company had no collateral posted with counterparties at  June 30, 2026 and  December 31, 2025. Collateral received from counterparties is included in “Interest-bearing deposits” in the accompanying consolidated balance sheets.

 

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)