Derivative Financial Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Hedging Activities

Note 7 – Derivative Financial Instruments and Hedging Activities

The Company enters into interest rate swap agreements to accommodate the needs of its banking customers. The Company mitigates the interest rate risk entering into these swap agreements by entering into equal and offsetting swap

agreements with highly-rated third-party financial institutions. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value in the consolidated balance sheets (asset positions are included in other assets and liability positions are included in other liabilities).

The following tables present the notional and fair value of interest rate swap agreements as of the dates stated.

	March 31, 2023
(Dollars in thousands)	Notional Amount		Fair Value
Interest rate swap agreement
Receive fixed/pay variable swaps	$	2,178	$	(57	)
Pay fixed/receive variable swaps		2,178		57
	December 31, 2022
(Dollars in thousands)	Notional Amount		Fair Value
Interest rate swap agreement
Receive fixed/pay variable swaps	$	2,178	$	(95	)
Pay fixed/receive variable swaps		2,178		95

As part of its efforts to sell originated government guaranteed and conventional residential mortgages into the secondary market, the Bank had entered into $13.3 million and $11.7 million of rate lock commitments with borrowers, net of expected fallout, as of March 31, 2023 and December 31, 2022, respectively, and $8.3 million and $12.8 million of closed loan inventory waiting for sale, which were hedged by $15.8 million and $21.5 million in forward to-be-announced mortgage-backed securities as of March 31, 2023 and December 31, 2022, respectively. Mortgage derivative assets totaled $455 thousand and $112 thousand as of March 31, 2023 and December 31, 2022, respectively, and mortgage derivative liabilities were $57 thousand and $24 thousand as of March 31, 2023 and December 31, 2022, respectively. Mortgage derivative assets and liabilities are included in other assets and other liabilities, respectively, in the consolidated balance sheets.