Quarterly report [Sections 13 or 15(d)]

DERIVATIVES

v3.26.3
DERIVATIVES
 9 Months Ended
Sep. 30, 2026
Derivatives [Abstract]  
Derivatives
NOTE 5 – DERIVATIVES
The Company
enters into derivative
financial instruments
to manage
exposures that
arise from business activities
that result in the
receipt or payment
of future known and uncertain
cash amounts,
the value of
which are determined
by interest rates.
The Company’s
derivative financial
instruments are
used to manage
differences in the
amount,
timing, and duration
of the Company’s
known or
expected cash
receipts and its known
or expected cash
payments
principally related to the
Company’s
subordinated
debt.
Cash Flow Hedges of
Interest Rate
Risk
The Company
previously maintained
interest rate swaps
with notional amounts
totaling $
30
million designated as a
cash flow hedge
for subordinated
debt. Under the swap
arrangement,
the Company
paid a fixed
interest rate of
2.50
% and received
a variable
interest
rate based
on three-month
CME Term SOFR. In October
2025, the
Company
terminated
the swaps and
derecognized the derivative
assets. The unrealized
gain of $
2.7
million was deferred in
accumulated
other comprehensive
income and
will be amortized on a
straight-line basis into
interest expense through
the remaining term
of the original cash
flow hedge. The Company
estimates there
will
be approximately
$
0.8
million reclassified as a decrease
to interest expense
within the next 12 months.
For derivatives designated
and that
qualify as
cash flow hedges of
interest rate risk, the gain or loss on
the derivative is recorded
in
accumulated
other comprehensive
income (“AOCI”) and
subsequently
reclassified into interest expense
in the same period(s) during
which the hedged
transaction
affects
earnings. Amounts reported
in AOCI related to derivatives
will be reclassified to interest expense
as interest payments
are made
on the Company’s
variable-rate
subordinated
debt.
The following table
presents the change
in net gains (losses) recorded in
AOCI and
the consolidated
statements
of income related
to
the cash flow derivative
instruments (interest rate
swaps related to
subordinated
debt).
Change in Gain
Amount of Gain
(Loss) Recognized
Reclassified
(Dollars in Thousands)
Category
in AOCI
from AOCI to Income
Three months
ended September
30, 2026
Interest expense
$
-
$
202
Three months
ended September
30, 2025
Interest expense
(189)
303
Nine months
ended September
30, 2026
Interest expense
$
-
$
600
Nine months
ended September
30, 2025
Interest expense
(1,076)
899