DERIVATIVES

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Customer Interest Rate Swaps

The Company has entered into interest rate swaps (“swaps”) with qualifying commercial banking customers to facilitate their risk management strategies and financing needs. These swaps provide customers with the ability to convert variable rates into fixed rates. They are economically hedged by offsetting interest rate swaps that the Company executes with derivative counterparties in order to offset its exposure on the fixed components of the customers' swaps. Swaps qualify as derivatives, but are not designated as hedging instruments. Fair values of the swaps are carried as both gross assets and gross liabilities in other assets and other liabilities,

respectively, in the Consolidated Statements of Condition. The associated changes in fair values of gross assets and gross liabilities net to zero in the Consolidated Statements of Income.

Mortgage Banking Derivatives

The Company enters into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The loans are sold to the secondary market on either a mandatory or best efforts basis. Loans sold on a mandatory basis are not committed to an investor until the loan is closed with the borrower. The Company enters into forward to-be-announced (“TBA”) sales contracts to manage the interest rate risk between the interest rate lock commitment and the funding of those loans. Loans sold on a best efforts basis are committed to an investor simultaneous to the interest rate lock commitment with the borrower, and as a result, the Company does not enter into a separate forward TBA contract to offset the fair value risk as the investor accepts such risk. Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives but are not designated as hedging instruments.

Fair Values of Derivative Instruments on the Balance Sheet

Derivatives are carried at fair value and are classified under other assets and other liabilities in the Consolidated Statements of Condition. Changes in fair value are recognized in earnings. None of the Company's derivatives are designated in a qualifying hedging relationship.

A summary of the Company’s interest rate swaps at December 31 for the years indicated is included in the following table:


	2023
(Dollars in thousands)	Notional Amount		Estimated Fair Value		Years to Maturity	Receive Rate		Pay Rate
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	247,875	$	15,867	5.5 years	7.29	%	4.01	%
Pay variable/receive fixed swaps	247,875		(15,867)		5.5 years	4.01	%	7.29	%
Total swaps	$	495,750	$	—	5.5 years	5.65	%	5.65	%


	2022
(Dollars in thousands)	Notional Amount		Estimated Fair Value		Years to Maturity	Receive Rate		Pay Rate
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	169,544	$	18,596	6.8 years	6.00	%	3.83	%
Pay variable/receive fixed swaps	169,544		(18,596)		6.8 years	3.83	%	6.00	%
Total swaps	$	339,088	$	—	6.8 years	4.92	%	4.92	%

The table below presents the notional amounts and fair values of the Company’s mortgage banking derivative financial instruments as of December 31, 2023 and December 31, 2022:


	December 31, 2023						December 31, 2022
(In thousands)	Notional		Asset		Liability		Notional		Asset		Liability


Mortgage Banking Derivatives:
Interest Rate Lock Commitments	16,608		358		—		21,118		319		—
Forward TBA Contracts	11,750		—		102		11,500		91		—
Total Mortgage Banking Derivatives	$	28,358	$	358	$	102	$	32,618	$	410	$	—

Effect of Derivatives on the Income Statement

The table below presents the changes in the fair value of the Company’s derivative financial instruments reflected within non-interest income on the Consolidated Statements of Income for the years ended December 31, 2023 and 2022, respectively.


(In thousands)	Location of Gain/(Loss)	2023		2022		2021
Interest rate lock commitments	Mortgage banking activities	$	49	$	(823)	$	(8,158)
Forward TBA contracts	Mortgage banking activities	(361)		108		971
Total		$	(312)	$	(715)	$	(7,187)