XML 31 R20.htm IDEA: XBRL DOCUMENT v3.24.1.u1
DERIVATIVES
 3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES DERIVATIVES
During the first quarter of 2023, the Company entered into interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.
Cash Flow Hedges: On March 21, 2023, the Company executed an interest rate swap with a notional amount that was designated as a cash flow hedge of certain Federal Home Loan Bank borrowings. The swap hedges the benchmark index (SOFR) with a receive float/pay fixed swap for the period March 21, 2023 through April 1, 2026. The notional amount of the interest rate swap as of March 31, 2024 and December 31, 2023 was $50.0 million. As of March 31, 2024 and December 31, 2023, this hedge was determined to be effective, and the Company expects the hedge to remain effective during the remaining terms of the swap.
Derivatives Not Designated as Hedges: During the three months ended March 31, 2023, the Company entered into interest rate swaps to offset interest rate exposure with its commercial and residential variable rate loan clients. Clients with variable rate loans may choose to enter into an interest rate swap to hedge the interest rate risk on the loan and effectively pay a fixed rate payment. The Company will simultaneously enter into an interest rate swap on the same underlying loan and notional amount to hedge risk on the fixed rate loan. The notional amount of interest rate swaps with its loan customers as of March 31, 2024 and December 31, 2023 was $31.9 million and $30.3 million, respectively. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.
The Company presents derivative position gross on the balance sheet. The following table reflects the fair value of derivatives recorded on the condensed consolidated balance sheets as of the periods noted (dollars in thousands):
As of March 31, 2024As of December 31, 2023
(dollars in thousands)
Notional AmountFair ValueNotional AmountFair Value
Included in other assets:
Derivatives designated as hedges:
Interest rate swaps - cash flow hedge$50,000 $571 $50,000 $77 
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans31,887 628 30,325 686 
Total included in other assets$1,199 $763 
Included in other liabilities:
Derivatives designated as hedges:
Interest rate swaps - cash flow hedge$— $— $— $— 
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans31,887 664 30,325 740 
Total included in other liabilities$664 $740 
The effect of cash flow hedge accounting on accumulated other comprehensive income for the periods noted are as follows (dollars in thousands):
Three Months Ended March 31, 2024Unrealized Gain (Loss) Recorded in OCI on DerivativeLocation of Gain (Loss) Reclassified from OCI into IncomeAmount of Gain (Loss) Reclassified from OCI into Income
Interest rate contracts$374 — $— 
Three Months Ended March 31, 2023Unrealized Gain (Loss) Recorded in OCI on DerivativeLocation of Gain (Loss) Reclassified from OCI into IncomeAmount of Gain (Loss) Reclassified from OCI into Income
Interest rate contracts$(268)— $— 
For the three months ended March 31, 2024, the Company recorded $0.2 million of interest income related to the swap to Other borrowed funds interest expense on the Condensed Consolidated Statements of Income. The Company recorded an immaterial amount of interest income related to the swap for the three months ended March 31, 2023.
The effect of derivatives not designated as hedging instruments recorded in Other non-interest income on the condensed consolidated statements of income for the three months ended March 31, 2024 and 2023 was immaterial.