Derivatives

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

NOTE 22 - DERIVATIVES

To accommodate customer need and to support the Company’s asset/liability positioning, on occasion we enter into interest rate swaps with a customer and a bank counterparty. The interest rate swaps are free-standing derivatives and are recorded at fair value. The Company enters into a floating rate loan and a fixed rate swap with our customer. Simultaneously, the Company enters into an offsetting fixed rate swap with a bank counterparty. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay a bank counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customer to effectively convert variable rate loans to fixed rate loans. Since the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the Company’s results of operations unless a significant difference in credit risk emerges between the counterparties at either end of one of the swap contracts. None of the Company’s derivatives are designated as hedging instruments.

NOTE 22 - DERIVATIVE HEDGING INSTRUMENTS (Continued)

The Company presents derivative positions gross on the balance sheet for customers and net for financial institution counterparty positions subject to master netting arrangements. The following table reflects the derivatives recorded on the balance sheet as of December 31:

	2022				2021
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets:
Interest rate swaps with loan customers in    an asset position	$	6,980	$	269	$	173,490	$	11,072
Counterparty positions with financial    institutions in an asset position		212,570		16,310		—		—
Total included in other assets			$	16,579			$	11,072
Included in accrued expenses and other    liabilities:
Interest rate swaps with loan customers in a    liability position	$	205,590	$	16,579	$	71,328	$	1,628
Counterparty positions with financial    institutions in an asset position		—		—		71,328		(1,628	)
Counterparty positions with financial    institutions in a liability position		—		—		173,490		11,072
Total included in accrued expenses and    other liabilities			$	16,579			$	11,072
Gross notional positions with customers	$	212,570			$	244,818
Gross notional positions with financial    institution counterparties	$	212,570			$	244,818

The effect of swap fair value changes on the Consolidated Statement of Operations for the years ended December 31, 2022, 2021 and 2020 are as follows:

	Location of	Amount of Gain or (Loss)
Derivatives	Gain or (Loss)	Recognized in
Not Designated	Recognized in	Income on Derivatives
as Hedging Instruments	Income on Derivative	2022		2021		2020
Interest rate swaps related to customer loans	Other income	$	—	$	64	$	(64	)
Total		$	—	$	64	$	(64	)

The Company monitors and controls all derivative products with a comprehensive Board of Director approved commercial loan swap policy. All hedge transactions must be approved in advance by the Lenders Loan Committee or the Directors Loan Committee of the Board of Directors. The Company classifies changes in the fair value of derivatives with “Other” in the Consolidated Statements of Operation. Any fees paid to enter the swap contract at inception are recognized in earnings when received. Such fees amounted to $247 and $207 during the years ended December 31, 2022 and 2021, respectively.

At December 31, 2022, the Company did not have any cash or securities pledged as collateral on its interest rate swaps with third party financial institutions. At December 31, 2021, the Company had cash and securities at fair value pledged as collateral on its interest rate swaps with third party financial institutions of $10,780 and $509, respectively.