Quarterly report [Sections 13 or 15(d)]

DERIVATIVES

v3.26.1
DERIVATIVES
 3 Months Ended
Mar. 31, 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 is 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
(Loss) Reclassified
(Dollars in Thousands)
Category
in AOCI
from AOCI to Income
Three months ended March 31, 2026
Interest expense
$
-
$
198
Three months ended March 31, 2025
Interest expense
326
375