Derivative Financial Instruments

6 Months Ended

Jun. 30, 2026

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 7 DERIVATIVE FINANCIAL INSTRUMENTS

The Bank entered into three pay-fixed receive variable interest rate swap transactions, with a combined notional value of $100 million, designated and qualifying as accounting hedges during the last quarter of 2023.

The following table presents amounts that were recorded on the Company's consolidated balance sheets related to cumulative basis adjustments for interest rate swap derivatives designated as fair value accounting hedges as of June 30, 2026 and December 31, 2025.


	(In Thousands)
	June 30, 2026				December 31, 2025
Line Item in the Consolidated Balance Sheets in which the Hedged Item is Included	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets		Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Loans	$	203,070	$	546	$	214,513	$	1,719

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Bank's asset/liability management activities at June 30, 2026 and December 31, 2025, identified by the underlying interest rate-sensitive instruments.


			Weighted Average
	Notional Value (In		Remaining Maturity		Fair Value (In			Weighted Average Rate
Instruments Associated With	Thousands)		(In Years)		Thousands)			Receive	Pay
Loans	$	100,000		1.1	$	(414	)	USD-SOFR-OIS		4.47	%
Total swap portfolio at June 30, 2026	$	100,000		1.1	$	(414	)	USD-SOFR-OIS		4.47	%


			Weighted Average
	Notional Value (In		Remaining Maturity		Fair Value (In			Weighted Average Rate
Instruments Associated With	Thousands)		(In Years)		Thousands)			Receive	Pay
Loans	$	100,000		1.6	$	(1,555	)	USD-SOFR-OIS		4.47	%
Total swap portfolio at December 31, 2025	$	100,000		1.6	$	(1,555	)	USD-SOFR-OIS		4.47	%

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of certain assets and liabilities. The Bank pledged $2.3 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at both June 30, 2026 and December 31, 2025. Collateral posted and received is dependent on the market valuation of the underlying hedges.

The following table presents the notional amount and fair value of interest rate swaps utilized by the Bank at June 30, 2026 and December 31, 2025.


	(In Thousands)
	June 30, 2026					December 31, 2025
	Notional Amount		Fair Value			Notional Amount		Fair Value
Asset Derivatives
Derivatives designated as hedging instruments
Interest rate swaps associated with loans	$	-	$	-		$	-	$	-
Total contracts	$	-	$	-		$	-	$	-
Liability Derivatives
Derivatives designated as hedging instruments
Interest rate swaps associated with loans	$	100,000	$	(414	)	$	100,000	$	(1,555	)
Total contracts	$	100,000	$	(414	)	$	100,000	$	(1,555	)

The following table presents the effects of the Bank's interest rate swap agreements on the Company’s consolidated statement of income during the three and six months ended June 30, 2026 and June 30, 2025.


	(In Thousands)
	Three Months Ended						Six Months Ended
Line Item in the Consolidated Statements of Income	June 30, 2026			June 30, 2025			June 30, 2026			June 30, 2025
Interest Income
Loans, including fees	$	(237	)	$	(21	)	$	(444	)	$	(45	)
Other		21			25			42			50
Total interest income	$	(216	)	$	4		$	(402	)	$	5

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

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+ Details

FARMERS & MERCHANTS BANCORP INC 10-Q