Derivatives

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

NOTE 9 – DERIVATIVES

The Company utilizes 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.

Interest Rate Swaps

The Company enters into swaps to facilitate customer transactions and meet their financing needs. Upon entering into these transactions the Company enters into offsetting positions with large U.S. financial institutions in order to minimize market risk to the Company. A summary of the Company’s customer related interest rate swaps was as follows (in thousands):

	June 30, 2022					December 31, 2021
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	37,038	$	1,477		$	54,055	$	(1,594	)
Pay variable/receive fixed swaps		37,038		(1,477	)		54,055		1,594
Total	$	74,076	$	—		$	108,110	$	—

Mortgage Banking Derivatives

The Company enters into various derivative agreements with customers in the form of interest-rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The derivatives are valued using a model that utilizes market interest rates and other unobservable inputs. Changes in the fair value of these commitments due to fluctuations in interest rates that are to be originated to our loans held for sale portfolio are economically hedged through the use of forward sale commitments of mortgage-backed securities. The gains and losses arising from this derivative activity are reflected in current period earnings under mortgage banking income. Interest rate lock commitments are valued using a model with significant unobservable market parameters. Forward sale commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable.

The net (losses) gains relating to mortgage banking derivative instruments included in mortgage banking income were as follows (in thousands):

	Three Months Ended			Six Months Ended
	June 30, 2022			June 30, 2022
Mortgage loan interest rate lock commitments	$	401		$	(70	)
Mortgage-backed securities forward sales commitments		(409	)		6
Total	$	(8	)	$	(64	)

The amount and fair value of mortgage banking derivatives included in the consolidated balance sheets were as follows (in thousands):

	June 30, 2022					December 31, 2021
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Included in other assets:
Mortgage loan interest rate lock commitments	$	59,522	$	626		$	50,281	$	696
Included in other liabilities:
Mortgage-backed securities forward sales commitments	$	43,500	$	(154	)	$	43,000	$	(160	)