Note 11 - Derivative Financial Instruments |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
Derivative Financial Instruments:
Interest Rate Swaps
The Company maintains an interest rate protection program for commercial loan customers. Under this program, the Company provides a variable rate loan while creating a fixed rate loan for the customer by the customer entering into an interest rate swap with terms that match the loan. The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution. The Company had interest rate swaps associated with commercial loans with a notional value of $105.0 million and fair value of $4.8 million in other assets and $4.8 million in other liabilities at September 30, 2026. At December 31, 2025, the Company had interest rate swaps associated with commercial loans with a notional value of $88.7 million and fair value of $911,000 in other assets and $911,000 in other liabilities. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815. 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 820.
There were no net gains or losses for interest rate swaps for the three and nine month periods ended September 30, 2026 and 2025.
Interest Rate Swap Designated as a Fair Value Hedge
At December 31, 2025, the Company had outstanding interest rate swap with a notional amount of $100.0 million, which subsequently matured in August 2026. This swap was designated as a fair value hedge to mitigate the risk of further interest rate increases and the subsequent impact on the valuation of the Company’s state and political subdivision municipal bond portfolio. At December 31, 2025, the gross aggregate fair value of the swap was $(529,000) and was recorded as a $(451,000) mark to market adjustment in other liabilities, and $(78,000) was recorded to other liabilities for the accrued interest payable in the Consolidated Balance Sheet. A summary of the interest rate swap designated as a fair value hedge at December 31, 2025 is presented below:
Mortgage Banking Derivatives
Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third-party investors are considered derivatives. The Company enters into forward commitments for the future delivery of residential mortgage loans when the interest rate locks are committed in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships.
The net gains (losses) relating to non-designated derivative instruments used for risk management are included in Net Gains on Sale of Loans on the Consolidated Statements of Income and are summarized below for the quarters ended September 30, 2026 and September 30, 2025:
The following table reflects the amount and fair value of mortgage banking derivatives included in the Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025:
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