v3.26.1
Derivatives
 6 Months Ended
Jun. 30, 2026
Derivatives [Abstract]  
Derivatives
7.
DERIVATIVES
The Company utilizes interest rate swap agreements
as part of its asset-liability management strategy to help
manage
its interest rate
risk exposure. The notional
amount of the interest
rate swaps does not
represent actual amounts exchanged
by the
parties.
The amounts
exchanged
are determined
by reference
to the
notional amount
and the
other
terms
of the
individual interest rate swap agreements.
Interest Rate Swaps Designated as a Cash Flow Hedge
As of
June 30, 2026,
the Company
had
two
costless collar
hedges
with a
notional
amount of
$
100
million that
were
designated as cash flow hedges of two three-month brokered CDs. The derivatives are based on the USD SOFR overnight
index and
have a
weighted average
cap rate
of
4.50
% and
weighted average
floor rate
of
1.763
%, effectively
creating a
defined range of interest rate outcomes without requiring an upfront premium. The
costless collar hedges have an average
maturity of
1.04
years.
As of
December 31,
2025, the
Company
had
two
costless
collar hedges
with
a notional
amount of
$
100
million that
were
designated
as
cash
flow
hedge
of
two
three-month
brokered
CDs.
The
derivatives
are
based
on
the
USD
SOFR
overnight
index and
have
a weighted
average cap
rate of
4.50
% and
weighted
average floor
rate
of
1.763
%, effectively
creating a defined range of interest rate outcomes without requiring an upfront
premium. The costless collar hedges had an
average maturity of
1.54
years.
During the
three months
ended June
30, 2026,
one
interest rate
swap agreement
matured. As
of June
30, 2026,
the
Company had
no
outstanding interest rate swap agreements.
As of
December 31,
2025, the
Company had
one
interest rate
swap agreement
with a
notional aggregate
amount of
$
25
million that was
designated as cash
flow hedge of
a certificate of
deposit. Under the
agreement, the Company
paid a
fixed rate
of
3.47
% and
received a
variable rate
based on
the weighted
‑
average three
‑
months compounded
USD SOFR.
The swap had a maturity of
0.42
years.
During the quarter
ended December
31, 2025, the
Company unwound
a separate
interest rate
swap designated
as a
cash flow hedge
of certificate of
deposit with notional
amount of $
25
million. The decision
to unwind this
swap was driven
by changes in interest rate forecasts and
asset-liability management strategies. The early termination income to unwind the
fair value swaps totaled $
5
thousand. The original maturity of the cash flow interest rate swap that was unwound during the
quarter was April 2026.
The changes
in fair
value of
these interest
rate swaps
are recorded
in other
assets or
accrued interest
and other
liabilities
with
a
corresponding
recognition
in
other
comprehensive
income
(loss)
and
subsequently
reclassified
to
earnings
when
gains or losses are realized.
Interest Rate Swaps
The Company enters into
interest rate swaps
with its loan
customers. The Company had
122
and
94
interest rate swaps
with
loan
customers
with
an
aggregate
notional
amount
of
$
401.9
million
and
$
310.8
million
at
June 30,
2026
and
December 31,
2025,
respectively.
At
June 30,
2026,
these
interest
rate
swaps
mature
between
2027
and
2051.
The
Company entered
into corresponding
and offsetting
derivatives with
third parties.
The fair
value of
the liability
created by
these derivatives requires the Company to
provide the counterparty with funds to be
held as collateral which the Company
reports as other assets under the Consolidated Balance
Sheets. While these derivatives represent economic
hedges, they
do not qualify as hedges for accounting purposes.
The following table reflects the Company’s
interest rate swaps at the dates indicated (in thousands):
Fair Value
Notional
Amount
Collateral
Amount
Balance Sheet Location
Asset
Liability
June 30, 2026:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
100,000
$
-
Other assets/Accrued
interest and other liabilities
$
92
$
-
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
401,882
$
7,037
Other assets/Accrued
interest and other liabilities
$
6,615
$
6,615
December 31, 2025:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
125,000
$
-
Other assets/Accrued
interest and other liabilities
$
14
$
33
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
310,761
$
5,769
Other assets/Accrued
interest and other liabilities
$
9,753
$
9,753