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Derivatives
9 Months Ended
Sep. 30, 2024
Derivatives [Abstract]  
Derivatives
6.
 
DERIVATIVES
The Company utilizes interest rate swap agreements
 
as part of its asset-liability management strategy to help
 
manage
its interest rate
 
risk exposure. The notional
 
amount of the interest
 
rate swaps does not
 
represent actual amounts exchanged
by the
 
parties.
 
The amounts
 
exchanged
 
are determined
 
by reference
 
to the
 
notional amount
 
and the
 
other
 
terms
 
of the
individual interest rate swap agreements.
 
Interest Rate Swaps Designated as a Cash Flow Hedge
As of September 30,
 
2024, the Company
 
had
two
 
interest rate swap
 
agreements with a
 
notional aggregate amount
 
of
$
50
 
million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have an
average
 
maturity
 
of
1.63
 
years,
 
a
 
weighted
 
average
 
fixed-rate
 
paid
 
of
3.59
%,
 
and
 
with
 
a
 
weighted
 
average
 
3-month
compound SOFR being received.
 
As of December
 
31, 2023,
 
the Company had
two
 
interest rate swap
 
agreements with
 
a notional aggregate
 
amount of
$
50
 
million that were designated as cash flow hedges of certificates of deposit. The interest rate swap agreements have an
average
 
maturity
 
of
2.38
 
years,
 
a
 
weighted
 
average
 
fixed-rate
 
paid
 
of
3.59
%,
 
and
 
with
 
a
 
weighted
 
average
 
3-month
compound SOFR being received.
The
 
changes
 
in
 
fair
 
value
 
on
 
these
 
interest
 
rate
 
swaps
 
are
 
recorded
 
in
 
other
 
assets
 
or
 
other
 
liabilities
 
with
 
a
corresponding recognition
 
in other comprehensive
 
income (loss)
 
and subsequently reclassified
 
to earnings when
 
gains or
losses are realized.
Interest Rate Swaps Designated as Fair Value
 
Hedge
During the quarter
 
ended September 30, 2024,
 
the Company unwound
four
 
fair value interest rate
 
swaps with a
 
notional
aggregate amount
 
of $
200
 
million. The
 
decision to
 
unwind these
 
swaps was
 
driven by
 
changes in
 
interest rate
 
forecasts
and asset-liability management strategies. The early
 
termination fee to unwind the
 
fair value swaps totaled $
3.7
 
million. The
termination fees
 
allocated to
 
each loan
 
category will
 
be amortized
 
over the
 
remining life
 
of the
 
hedge loans
 
on a
 
monthly
straight-line basis with full recognition of the unamortized
 
cost upon the early payoff of the hedge
 
loan. The amortization of
the termination fee
 
is reflected in
 
the loan interest income
 
line in the
 
statement of operations.
 
The original maturities of
 
these
fair
 
value
 
interest
 
swaps
 
were
 
between
 
2025
 
and
 
2026.
 
The
 
fair
 
value
 
interest
 
rate
 
swap
 
agreements
 
had
 
an
 
average
maturity of
1.51
 
years at the date of termination.
Interest Rate Swaps
The Company enters into interest rate swaps with its loan customers. The Company had
39
 
and
20
 
interest rate swaps
with
 
loan
 
customers
 
with
 
an
 
aggregate
 
notional
 
amount
 
of
 
$
143.8
 
million
 
and
 
$
46.5
 
million
 
at
 
September 30,
 
2024
 
and
December 31, 2023, respectively.
 
At September 30, 2024, these
 
interest rate swaps mature between
 
2025 and 2051. The
 
Company
 
entered
 
into
 
corresponding
 
and
 
offsetting
 
derivatives
 
with
 
third
 
parties.
 
The
 
fair
 
value
 
of
 
liability
 
on
 
these
derivatives requires the Company to
 
provide the counterparty with funds to
 
be held as collateral which
 
the Company reports
as other assets under
 
the Consolidated Balance
 
Sheets.
 
While these derivatives
 
represent economic hedges,
 
they do not
qualify as hedges for accounting purposes.
The following table reflects the Company’s
 
interest rate swaps at the dates indicated (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
Notional
Amount
Collateral
Amount
Balance Sheet Location
Asset
Liability
September 30, 2024:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
50,000
$
-
Other assets
$
18
$
-
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
143,801
$
4,886
Other assets/Other liabilities
$
7,695
$
7,695
December 31, 2023:
Derivatives designated as cash flow hedges:
Interest rate swaps
$
50,000
$
-
Other assets
$
334
$
-
Derivatives designated as fair value hedges:
Interest rate swaps
$
200,000
$
-
Other liabilities
$
-
$
3,430
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans
$
46,463
$
1,326
Other assets/Other liabilities
$
4,558
$
4,558