DERIVATIVES AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

NOTE 18 – DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to certain risks relating to its ongoing business operations. As such, from time to time, the Company will enter into interest rate derivatives as part of its asset liability management strategy to help manage interest rate risk. Derivative instruments represent contracts between parties that result in one party delivering cash to the other party based on a notional amount and an underlying term (such as a rate, security price or price index) as specified in the derivative contract. The amount of cash delivered from one party to the other is determined based on the interaction of the notional amount of the contract with the underlying term. Derivatives may also be implicit in certain contracts and commitments.

Derivative financial instruments in the consolidated financial statements are recognized at fair value regardless of the purpose or intent for holding the instrument. Derivative assets and derivative liabilities on the balance sheet are recorded within other assets and other liabilities, respectively. Changes in the fair value of derivative financial instruments are either recognized in income or in shareholders’ equity as a component of accumulated other comprehensive income or loss depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or cash flow hedge.

As part of the Company’s interest rate risk management strategy, two pay-fixed/receive-floating interest rate swaps (the “Pay Fixed Swap Agreements”) were entered into on August 30, 2024, for a total notional amount of $30 million, both of which were designated as fair value hedges. The Pay Fixed Swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the derivative contracts without the exchange of the underlying notional amount. Each swap agreement was effective immediately and each expire August 30, 2027.

The table below presents fair values of derivative instruments as well as the classification within the consolidated balance sheets:

	September 30, 2024			December 31, 2023
(in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate swap contracts	Accrued interest and other liabilities	$	201	Accrued interest and other liabilities	$	—

The table below presents the effect of fair value hedge accounting on the consolidated statements of income (loss) for the periods presented:

	Location and Amount of Gain or (Loss) Recognized in Income on Fair Value Hedging Relationships					Location and Amount of Gain or (Loss) Recognized in Income on Fair Value Hedging Relationships
	Nine months ended September 30, 2024					Year Ended December 31, 2023
(in thousands)	Interest on securities			Interest Expense		Interest on securities		Interest Expense
Total amounts of income and expense line items presented in consolidated statements of income (loss) in which effects of the fair value hedges are recorded	$	1,444		$	0	$	0	$	0
Gain or (loss) on fair value hedging relationships:
Interest rate swap contracts:
Hedged items	$	206		$	0	$	0	$	0
Derivatives designated as hedging instruments	$	(201	)	$	0	$	0	$	0
Amount excluded from effectiveness testing recognized in earnings based on amortization approach	$	0		$	0	$	0	$	0

The table below presents cumulative basis adjustments of hedged items designated as fair value hedges and related amortized cost of those items as of the date presented:

(in thousands)	As of September 30, 2024
Line Item in consolidated balance sheet in which hedged item is included	Amortized cost of Hedged Assets		Cumulative amount of Fair Value Hedging Adjustments included in carrying amount of Hedged Asset
Securities available for sale	$	52,053	$	(206	)