Derivatives

9 Months Ended

Sep. 30, 2021

Derivatives

Derivatives

12. DERIVATIVES

The Company uses 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.

As of September 30, 2021, interest rate swaps with a notional amount totaling $40,000,000 were designated as cash flow hedges on fixed-rate brokered deposits and certain FHLB advances. As of December 31, 2020, interest rate swaps with a notional amount totaling $40,000,000, were designated as cash flow hedges on certain FHLB advances. The interest rate swaps were determined to be fully effective during the periods presented, and as such, no amount of ineffectiveness have 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 following table reflects the notional amounts and fair values of derivatives recorded on the Consolidated Statements of Condition as of September 30, 2021 and December 31, 2020.

(Dollars in thousands)	September 30, 2021				December 31, 2020
			Fair				Fair
			Value				Value
	Notional		Asset		Notional		Asset
	Amount		(Liability)		Amount		(Liability)
Derivatives designated as hedges:
Interest rate swap - pay fixed / receive floating on 3-month brokered deposit	$	20,000	$	(61)	$	—	$	—
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		496		20,000		66

The effect of cash flow hedge accounting on accumulated other comprehensive income for the periods ended September 30, 2021 and December 31, 2020 are as follows:

(Dollars in thousands)	September 30, 2021
	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	$	449	Interest expense on short-term borrowings and repurchase agreements	$	43

(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 three and nine months ended September 30, 2021 and September 30, 2020 was as follows:

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

	Interest Income (Expense)				Interest Income (Expense)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2021		2020		2021		2020
Effects of cash flow hedging:
Gain (loss) on cash flow hedging relationships:
Amount reclassified from AOCI into income	$	(17)	$	(1)	$	(43)	$	21
Total	$	(17)	$	(1)	$	(43)	$	21