DERIVATIVES AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company utilizes 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.

The Company had interest rate swaps with notional amounts totaling $259.0 million and $109.0 million at September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, they were designated as cash flow hedges of certain Federal Home Loan Bank (“FHLB”) advances and brokered deposits and, as of December 31, 2022, they were designated as cash flow hedges of certain Federal Home Loan Bank (“FHLB”) advances. They were determined to be highly effective during all periods presented. The Company expects the hedges to remain highly effective during the remaining terms of the swaps.

Summary information about the interest rate swaps designated as cash flow hedges as of period-end is as follows:


	September 30, 2023			December 31, 2022
	(Dollars in thousands)
Notional amounts	$	259,000		$	109,000
Weighted average pay rates	2.91		%	1.46		%
Weighted average receive rates	5.43		%	4.61		%
Weighted average maturity (in years)	3.4			4.2

Gross unrealized gain included in other assets	$	14,350		$	11,091
Gross unrealized loss included in other liabilities	—			—
Unrealized gains, net	$	14,350		$	11,091

At September 30, 2023, the Company held $15.3 million as cash collateral pledged from the counterparty for these interest-rate swaps and had no securities pledged to the counterparty. At December 31, 2022, the Company held $11.5 million as cash collateral pledged from the counterparty and had no securities pledged to the counterparty.

Interest income or expense recorded on these swap transactions is reported as a component of interest expense on FHLB advances or brokered deposits. Interest income during the three months ended September 30, 2023 totaled $1.5 million and interest income for the three months ended September 30, 2022 totaled $198 thousand. Interest income during the nine months ended September 30, 2023 totaled $3.9 million and interest expense for the nine months ended September 30, 2022 totaled $270 thousand. At September 30, 2023, the Company expected $1.8 million of the unrealized gain to be reclassified as a reduction to interest expense during the remainder of 2023.

Cash Flow Hedge

The effect of cash flow hedge accounting on accumulated other comprehensive income for the three and nine months ended September 30, 2023 and September 30, 2022, is as follows:


	Amount of Gain Recognized in OCI (Net of Tax) on Derivative (1)		Location of Gain (Loss) Reclassified from OCI into Income/(Expense)	Amount of Gain (Loss) Reclassified from OCI to Income/(Expense)
	(In thousands)
Three months ended September 30, 2023
Interest rate contracts	$	1,900	Interest Expense	$	1,535

Three months ended September 30, 2022
Interest rate contracts	$	4,096	Interest Expense	$	198

Nine months ended September 30, 2023
Interest rate contracts	$	3,259	Interest Expense	$	3,885

Nine months ended September 30, 2022
Interest rate contracts	$	12,015	Interest Expense	$	(270)

(1) Net of tax, adjusted for deferred tax valuation allowance.