v3.26.1
Derivatives and Hedging Activities
 6 Months Ended
Jun. 30, 2026
Derivatives and Hedging Activities [Abstract]  
Derivatives and Hedging Activities

11.        Derivatives and Hedging Activities

 

The Corporation utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and other terms of the individual interest rate swap agreements.

 

Cash Flow Hedges: Two interest rate swaps with notional amounts totaling $60,000,000 at June 30, 2026 and December 31, 2025 were designated as cash flow hedges of certain short-term FHLB advances and were determined to be effective for the periods presented. The Corporation expects the hedges to remain effective during the remaining terms of the swaps. These cash flow hedges are pay-fixed rate hedges for the purpose of hedging variable cash flows associated with the Corporation’s short-term borrowings.

 

Fair Value Hedges: Thirteen interest rate swaps with notional amounts totaling $166,744,000 and $175,775,000 at June 30, 2026 and December 31, 2025 were designated as portfolio hedges of individual fixed rate mortgage-backed securities included in securities available for sale. The hedges were determined to be effective for the periods presented. These fair value hedges are pay-fixed rate hedges designed as a hedge of the exposure to changes in the fair value of securities available for sale.

 

The following table summarizes the notional amounts and fair value of the Corporation’s derivative instruments at June 30, 2026 and December 31, 2025 (in thousands):

 

    As of June 30, 2026   As of December 31. 2025
    Notional /
Contract		   Asset   Liability   Notional /
Contract		   Asset   Liability
Line Item in the Balance Sheet Which   Amount   Fair Value (a)   Fair Value (b)   Amount   Fair Value (a)   Fair Value (b)
the Hedged Item is Included   $   $   $   $   $   $
Derivatives used for hedging instruments:                                                
Interest rate swap contracts :                                                
Securities available for sale (fair value hedges)     166,744       2,549       —       70,081       811       —  
Securities available for sale (fair value hedges)     —       —       —       105,694       —       851  
Short-term borrowings (cash flow hedges)     60,000       —       13       60,000       —       207  
Total derivatives designated for hedging     226,744       2,549       13       235,775       811       1,058  

 

(a) Included in Other assets on the Consolidated Balance Sheet.

(b) Included in Other liabilities on the Consolidated Balance Sheet.

 

The following table is a summary of components for interest rate swaps designed as hedging instruments at June 30, 2026 and December 31, 2025 (in thousands):

 

    Weighted
Average Pay
Rate		   Weighted
Average
Receive Rate		   Weighted
Average
Maturity
(In Years)
             
June 30, 2026                        
Cash flow hedge designation                        
Interest rate swaps-short term borrowings     3.84%       3.63%       0.4  
Fair value hedge designation                        
Interest rate swaps - available for sale securities     3.65%       3.67%       12.1  
                         
December 31, 2025                        
Cash flow hedge designation                        
Interest rate swaps-short term borrowings     3.84%       3.98%       0.9  
Fair value hedge designation                        
Interest rate swaps - available for sale securities     3.65%       3.82%       12.6  

 

The following table summarizes the effect of the Corporation’s derivative financial instruments on OCI and net income for the three and six months ended June 30, 2026 and 2025 (in thousands):

 

    Three Months ended June 30,     Six Months ended June 30,      
    2026     2025     2026     2025     Location of Gains (losses) Recognized
    $     $     $     $     from AOCI into Income
                             
Derivatives Used for hedging instruments:                                
Fair value hedges     (11 )     318       (4 )     653     Interest income - securities
Cash flow hedges     31       (77 )     55       (154 )   Interest expense - short term borrowings
                                     

 

    2026     2025     2026     2025     Location of Gains (losses) Recognized
    $     $     $     $     in Income
Derivatives Used for hedging instruments:                                
Fair value hedges     0       26       (33 )     27     Interest income - securities

 

The amounts recognized from accumulated other comprehensive income into condensed statement of income represent the amount of cash settlements between the Corporation and the counterparty. The amount recognized directly as interest income on fair value hedges relates to the adjustments required for periodic remeasurements.

 

The Corporation has agreements with its derivative counterparty that contains a provision where, if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender on its cash flow hedges, then the Corporation could also be declared in default on its derivative obligations. In addition, the Corporation also has agreements with its derivative counterparty that contains a provision where, if the Corporation fails to maintain its status as a well / adequately-capitalized institution, then the counterparty could terminate the derivative positions and the Corporation would be required to settle its obligations under the agreements. As of June 30, 2026, the Corporation had $2,000,000 held by its counterparty as collateral for its derivative agreements.