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| INTEREST RATE DERIVATIVES | NOTE 9 – INTEREST RATE DERIVATIVES At June 30, 2026, the Company had six separate interest rate swap agreements with notional amounts totaling $300.0 million. The interest rate swaps are two-year forward three-year term swaps (five-year total term) where cash settlements began in October 2023, January 2024 or April 2024. The swap agreements were designated as cash flow hedges of our deposit accounts that are indexed to the Federal Funds Effective Rate. The swaps are determined to be highly effective since inception and therefore no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps amounted to an unrealized gain of $3.3 million and $5.5 million and an unrealized loss of $0 and $0 at June 30, 2026 and, December 31, 2025 respectively. These unrealized gains and losses are recorded in “Interest Rate Derivatives” and “Other Liabilities” on the Consolidated Balance Sheets. The Company expects the hedges to remain highly effective during the remaining terms of the swaps. During 2026, the Company entered into two additional interest-rate cap agreements with aggregate notional amounts totaling $200.0 million consisting of a $100.0 million cap entered into on April 10, 2026 and a $100.0 million cap entered into on June 16, 2026, with a cap rate of 4.00%. These two interest rate caps are two-year term spot caps where cash settlements began in May 2026 and June 2026. During January 2025, the Company entered into three interest rate cap agreements with notional amounts totaling $200.0 million, all with a cap rate of 4.50%. One of these interest rate caps is a two-year spot cap where cash settlements began in February 2025. The other two interest rate caps are forward starting two-year term caps where cash settlements began in June 2025 or July 2025. During October 2021, the Company entered into an interest rate cap agreement with a notional amount of $50.0 million at a cap rate of 2.50%. This interest rate cap is a two-year forward three-year term (five-year total term) where cash settlements began in November 2023. The interest rate cap agreements were designated as cash flow hedges of our deposit accounts that are indexed to the Federal Funds Effective Rate. The rate cap premium paid by the Company at inception will be amortized on a straight-line basis to deposit interest expense over the total term of the interest rate cap agreement. The aggregate fair value of the interest rate caps, inclusive of unamortized interest rate cap premiums, amounted to an unrealized gain of $1.5 million and $819,000 and an unrealized loss of $430,000 and $451,000 at June 30, 2026 and December 31, 2025, respectively. These unrealized gains and losses are recorded in “Interest Rate Derivatives” and “Other Liabilities” on the Consolidated Balance Sheets. The Company is exposed to credit related losses in the event of the nonperformance by the counterparties to the interest rate swaps. The Company performs an initial credit evaluation and ongoing monitoring procedures for all counterparties and currently anticipates that all counterparties will be able to fully satisfy their obligation under the contracts. In addition, the Company may require collateral from counterparties in the form of cash deposits in the event that the fair value of the contracts are positive and such fair value for all positions with the counterparty exceeds the credit support thresholds specified by the underlying agreement. Conversely, the Company is required to post cash deposits as collateral in the event the fair value of the contracts are negative and are below the credit support thresholds. At June 30, 2026, there were no cash deposits pledged as collateral by the Company. At June 30, 2026, the Company had $4.5 million of restricted cash obtained from the counterparties as collateral for the significant unrealized gains on our interest rate derivatives. Summary information for the interest rate swaps designated as cash flow hedges is as follows:
Summary information for the interest rate caps designated as cash flow hedges is as follows:
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