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INTEREST RATE SWAPS | 9 Months Ended
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Sep. 30, 2025
INTEREST RATE SWAPS |
INTEREST RATE SWAPS | 11. INTEREST RATE SWAPS ​ Interest rate swap derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies for hedge accounting as part of a cash flow hedging relationship. For a derivative designated as a cash flow hedge, the effective portion of the derivative’s unrealized gain or loss is recorded as a component of OCI. The amount included in AOCI would be reclassified to current earnings should the hedge no longer be considered effective. Derivatives not designated as hedges are economic derivatives with the gain or loss recognized in current period earnings. ​ Interest Rate Swaps Used as Cash Flow Hedges ​ The Bank entered into three interest rate swap agreements during the second quarter of 2024 related to FHLB advances tied to 1-month SOFR. The counterparty for all three swaps met the Bank’s credit standards and the Bank believes that the credit risk inherent in the swap contracts is not significant. As of August 8, 2024 the Bank designated the swaps to be effective for hedge accounting purposes. The Bank expects the hedges to remain fully effective during the remaining term of the swaps. ​ The following tables reflect information about swaps designated as cash flow hedges: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | September 30, 2025 | ​ | December 31, 2024
​ | ​ | ​ | ​ | Notional | ​ | ​ | ​ | Notional | ​ | ​
(in thousands) |  | Bank Position |  | Amount |  | Fair Value |  | Amount |  | Fair Value
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swaps on FHLB advances - Other liabilities and accrued interest payable |  | Pay fixed/receive variable |  | $ | 100,000 |  | $ | (2,907) |  | $ | 100,000 |  | $ | (647)
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | September 30, 2025 | ​ | December 31, 2024
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Unrealized | ​ | ​ | ​ | ​ | Unrealized
​ | ​ | Notional | ​ | Pay | ​ | Receive | ​ | ​ | ​ | ​ | ​ | Assets / | ​ | Gain (Loss) | ​ | Assets / | ​ | Gain (Loss)
(dollars in thousands) |  | Amount |  | Rate |  | Rate |  | Term | ​ | Bank Position |  | (Liabilities) |  | in AOCI |  | (Liabilities) |  | in AOCI
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swaps on FHLB advances - Other liabilities and accrued interest payable |  | $ | 100,000 |  | 4.14 | % |  | 1M SOFR |  | 5/2024 - 6/2029 | ​ | Pay fixed/receive variable |  | $ | 100,000 |  | $ | (2,180) |  | $ | 100,000 |  | $ | (647)
​ The following table reflects the total interest expense recorded on these swap transactions in the consolidated statements of income: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended | ​ | Nine Months Ended |
​ | ​ | September 30, | ​ | September 30, | ​
(in thousands) | ​ | 2025 |  | 2024 |  | 2025 |  | 2024 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swaps on FHLB advances | ​ | $ | (47) | ​ | $ | (289) | ​ | $ | (138) | ​ | $ | (380) | ​
Total interest (benefit) expense on swap transactions | ​ | $ | (47) | ​ | $ | (289) | ​ | $ | (138) | ​ | $ | (380) | ​
​ The following table presents the net gains (losses) recorded in OCI and the consolidated statements of income relating to the swaps designated as cash flow hedges: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Nine Months Ended | ​ | ​
​ | ​ | September 30, | ​ | September 30, | ​ | ​
(in thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Losses recognized in OCI on derivative (effective portion) |  | $ | 51 |  | $ | (3,134) |  | $ | (2,122) |  | $ | (3,580) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Losses reclassified from OCI on derivative (effective portion) | ​ | ​ | (47) |  | ​ | 289 |  | ​ | (138) |  | ​ | 380 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gains (losses) recognized in income on derivative (ineffective portion) | ​ | ​ | — |  | ​ | — |  | ​ | — |  | ​ | — | ​ | ​
​ ​ Non-hedge Interest Rate Swaps ​ The Bank also enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments, the Bank enters into offsetting positions in order to minimize the Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments, and therefore changes in fair value are reported in current year earnings. ​ Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty or client owes the Bank, and results in credit risk to the Bank. When the fair value of a derivative instrument contract is negative, the Bank owes the client or counterparty, and therefore, has no credit risk. ​ A summary of the Bank’s interest rate swaps related to clients is included in the following table: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ |  | September 30, 2025 | ​ | December 31, 2024 | ​
​ | ​ | ​ | ​ | Notional | ​ | ​ | ​ | ​ | Notional | ​ | ​ | ​ | ​
(in thousands) |  | Bank Position | ​ | Amount |  | Fair Value |  | Amount |  | Fair Value | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swaps with Bank clients - Other assets and accrued interest receivable |  | Pay variable/receive fixed |  | $ | 165,550 | ​ | $ | 4,159 |  | $ | 103,707 | ​ | $ | 1,070 | ​
Interest rate swaps with Bank clients - Other liabilities and accrued interest payable |  | Pay variable/receive fixed |  | ​ | 74,436 |  | ​ | (2,586) |  | ​ | 128,621 |  | ​ | (5,518) | ​
Interest rate swaps with Bank clients - Total |  | Pay variable/receive fixed |  | $ | 239,986 |  | $ | 1,573 |  | $ | 232,328 |  | $ | (4,448) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Offsetting interest rate swaps with institutional swap dealer - Other assets and accrued interest receivable | ​ | Pay fixed/receive variable | ​ | ​ | 74,436 | ​ | ​ | 2,586 | ​ | ​ | 128,621 | ​ | ​ | 5,518 | ​
Offsetting interest rate swaps with institutional swap dealer - Other liabilities and accrued interest payable | ​ | Pay fixed/receive variable | ​ | ​ | 165,550 | ​ | ​ | (4,159) | ​ | ​ | 103,707 | ​ | ​ | (1,070) | ​
Offsetting interest rate swaps with institutional swap dealer - Total | ​ | Pay fixed/receive variable | ​ | $ | 239,986 |  | $ | (1,573) |  | $ | 232,328 |  | $ | 4,448 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total | ​ | ​ |  | $ | 479,972 | ​ | $ | — |  | $ | 464,656 | ​ | $ | — | ​
​ The Bank and its counterparties are required to pledge securities or cash as collateral when either party is in a net loss position exceeding $250,000 with the other party. As of September 30, 2025 and December 31, 2024, the Bank’s counterparties had cash of $0 and $4 million pledged to the Bank, which were included in Interest-bearing deposits on the Company’s Balance Sheet. Conversely, the Bank had $5 million and $0 pledged to its counterparties as of September 30, 2025 and December 31, 2024, which were included in Cash and cash equivalents on the Company’s Balance Sheet.

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