Derivatives

12 Months Ended

Dec. 31, 2020

Derivatives

Derivatives

22. DERIVATIVES

The Company began utilizing interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position in 2020. 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 with a notional amount totaling $40,000,000 as of December 31, 2020, were designated as cash flow hedges on certain FHLB advances. Because the interest rate swap agreements did not commence until 2020, there was no notional value as of December 31, 2019. The interest rate swaps were determined to be fully effective during the period presented, and as such, no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in either other assets or other liabilities on the Consolidated Statements of Condition with changes in fair value recorded in other comprehensive income. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

The Company presents derivative positions gross on the balance sheet. The following table reflects the derivatives recorded on the Consolidated Statements of Condition as of December 31, 2020.

(Dollars in thousands)	December 31, 2020
	Notional		Fair
	Amount		Value
Included in other liabilities:
Derivatives designated as hedges:
Interest rate swap - pay fixed / receive floating on 3-month FHLB advance	$	20,000	$	(123)
Interest rate swaps - forward-starting on long-term FHLB advances		20,000		66
Total included in other liabilities			$	(57)

The effect of cash flow hedge accounting, before income taxes, on accumulated other comprehensive income for the period ended December 31, 2020 is as follows:

(Dollars in thousands)	December 31, 2020
	Amount of Gain		Location of (Gain)	Amount of (Gain)
	(Loss) Recognized in		Loss Reclassified	Loss Reclassified
	OCI on Derivatives		from OCI into Income	from OCI into Income
Interest rate contracts	$	(48)	Interest expense on short-term borrowings and repurchase agreements	$	(9)

The effect of cash flow hedge accounting on the Consolidated Statements of Income for the year ended December 31, 2020 was as follows:

Location and Amount of Gain or Loss Recognized in Income on Fair Value and Cash Flow Hedging Relationships

	Year Ended
(Dollars in thousands)	December 31, 2020
	Interest		Other
	Income		Income
	(Expense)		(Expense)
Effects of cash flow hedging:
Gain on cash flow hedging relationships:
Amount reclassified from AOCI into income	$	9	$	—
Total		9		—