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Note 8 - Derivative Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 8. Derivative Instruments and Hedging Activities

 

Generally, derivative instruments help the Company manage exposure to market risk and meet customer financing needs. Market risk represents the possibility that fluctuations in external factors such as interest rates, market-driven loan rates, prices, or other economic factors will adversely affect economic value or net interest income.

 

The Company has used interest rate swap contracts to modify its exposure to interest rate risk caused by changes in benchmark interest rates in relation to certain designated fixed rate loans.  These instruments are used to convert these fixed rate loans to an effective floating rate. If the Secured Overnight Financing Rate ("SOFR") plus a spread falls below the loan’s stated fixed rate for a given period, the Company will owe the floating rate payer the notional amount times the difference between the floating rate and the stated fixed rate. If SOFR is above the stated rate for a given period, the Company will receive payments based on the notional amount times the difference between the floating rate and the stated fixed rate. 

 

The Company's interest rate swaps qualify as fair value hedging instruments; therefore, fair value changes in the derivative and hedged item attributable to the hedged risk are recognized in earnings in the same period. The fair value hedges were effective as of June 30, 2025, and December 31, 2024.

 

The following table presents the notional, or contractual, amounts and fair values of derivative instruments as of the dates indicated:

 

  

June 30, 2025

  

December 31, 2024

 
  

Notional or

  

Fair Value

  

Notional or

  

Fair Value

 
  

Contractual

  

Derivative

  

Derivative

  

Contractual

  

Derivative

  

Derivative

 

(Amounts in thousands)

 

Amount

  

Assets

  

Liabilities

  

Amount

  

Assets

  

Liabilities

 

Derivatives designated as hedges

                        

Interest rate swaps

 $2,877  $63  $-  $3,109  $116  $— 

Total derivatives

 $2,877  $63  $-  $3,109  $116  $- 

 

The following table presents the effect of derivative and hedging activity, if applicable, on the consolidated statements of income for the periods indicated:

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

  

(Amounts in thousands)

 

2025

  

2024

  

2025

  

2024

 

Income Statement Location

Derivatives designated as hedges

                 

Interest rate swaps

 $(15) $(26) $(31) $(53)

Interest and fees on loans

Total derivative (income) expense

 $(15) $(26) $(31) $(53)