DERIVATIVES

12 Months Ended

Dec. 31, 2024

DERIVATIVES

DERIVATIVES

22. DERIVATIVES

The Company may enter into derivative financial instruments as part of its asset liability management strategy to help manage its interest rate risk position and to meet the needs of customers.

Derivatives Designated as Hedging Instruments

The Company had no derivatives designated as cash flow hedges as of December 31, 2024 and December, 31, 2023. In April 2023, the Company’s remaining interest rate swap with a notional amount of $20.0 million designated as a cash flow hedge on a short-term FHLB advance matured. Changes in fair value of the swap were recorded in other comprehensive income. The interest rate swap was determined to be fully effective during the 2023 period and, as such, no amount of ineffectiveness was included in net income.

The effect of cash flow hedge accounting, before income taxes, on accumulated other comprehensive income for the period ended December 31, 2023 was as follows:

(Dollars in thousands)	December 31, 2023
	Amount of Gain		Location of Gain	Amount of Gain
	Recognized in		Reclassified	Reclassified from
	OCI on Derivatives		from OCI into Income	OCI into Income
Interest rate contract	$	2	Interest expense on short-term borrowings and repurchase agreements	$	(269)
Total	$	2		$	(269)

The gain recognized into income for the cash flow hedging relationship on the Consolidated Statements of Income for the year ended December 31, 2023 was $269,000.

Derivatives Not Designated as Hedging Instruments

The Company entered into risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which the Company is a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. These risk participation agreements are recorded within other liabilities on the Consolidated Statement of Financial Condition at their estimated fair value. At December 31, 2024 and 2023, the estimated fair value of the risk participation agreements was $24,000 and $25,000, respectively. Changes to the fair value of the risk participation agreements are included in fees derived from loan activity in the Consolidated Statement of Income. The company recorded income of $32,000 and $57,000, respectively, for the years ended December 31, 2024 and 2023.

The Company acts as an interest rate swap counterparty for commercial borrowers, which are accounted for at fair value. The Company manages its exposure to such interest rate swaps by entering corresponding and offsetting interest rate swaps with a third party that mirrors the terms of the swap with the commercial borrower. This position, referred to as a “back-to-back swap”, directly offsets itself, and Juniata’s exposure is the fair value of the derivative due to changes in credit risk of the commercial borrower and third party. The back-to-back swaps are recorded within other assets and other liabilities on the Consolidated Statement of Financial Condition at their estimated fair value which was $20,000 at December 31, 2024. The Company recognized $79,000 in fee income for the year ended December 31, 2024 upon the execution of the back-to-back swap contracts which is included in fees derived from loan activity in the Consolidated Statement of Income. The Company had no back-to-back swaps in 2023.