Note 18 - Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Note 18 - Derivatives and Hedging Activities

QNB's risk management objective with respect to derivative financial instruments is to hedge the risk of changes in the fair value of certain fixed-rate investment securities, included in a closed portfolio, for changes in the Secured Overnight Financing Rate ("SOFR"). The effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income, net of tax, and are reclassified to interest income as interest payments are made or received on the hedged portfolios. QNB assesses the effectiveness of each hedging relationship using a regression analysis of prior periodic changes in fair value of both the hedge and the hedged item. In the assessment of hedge effectiveness, QNB will consider the likelihood of the counterparty's compliance with the contractual terms of the hedging derivative that could require the counterparty to make payments (counterparty default risk). If the likelihood that the counterparty will not default ceases to be probable, the hedge may no longer be highly effective and hedge ineffectiveness due to counterparty payment risk will be assessed.

The following table presents the notional amounts of derivatives designated as fair value hedging instruments at December 31, 2023. QNB pledges cash or securities to cover the negative fair value of derivatives instruments. Cash collateral associated with the derivative instruments are not added to or netted against the fair value amounts. QNB did not have any derivatives designated as fair value hedging instruments at December 31, 2022.

	At December 31, 2023
	Interest Rate Swaps-Fair Value Hedges
Balance Sheet Classification	Notional Amount		Amortized Cost of Hedged Portfolio		Cumulative Amount of Fair Value Hedging Adjustment Included in Carrying Amount of Hedged Asset
Investment Securities Available-for-sale:
State and municipal securities	$	75,000	$	97,373	$	(445	)
U.S. Government agencies and GSE mortgage backed securities		225,000		343,453		(1,304	)
Total	$	300,000	$	440,826	$	(1,749	)

The following table presents amounts of included in the Consolidated Statements on Income for derivatives designated as fair value hedging instruments for the year ended December 31, 2023.

For the year ended	December 31,
Income Sheet Classification	2023
Interest and dividends on available-for-sale and equity securities:
State and municipal securities
Recognized on fair value hedge	$	2,180
Recognized on hedge portfolio		(1,470	)
Recognized on remeasurement of fair value hedge		16
U.S. Government agencies and GSE mortgage backed securities
Recognized on fair value hedge		6,517
Recognized on hedge portfolio		(4,483	)
Recognized on remeasurement of fair value hedge		41
Total	$	2,801

The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as fair value hedging instruments at December 31, 2023.

Balance Sheet Classification	At December 31, 2023
Accumulated other comprehensive loss, net of tax	$	(1,382	)
Total	$	(1,382	)