Derivatives

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

(14) 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. None of the Company’s derivatives are designated as hedging instruments.

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

	September 30, 2023				December 31, 2022
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets:
Interest rate swaps with loan customers in an    asset position	$	2,250	$	11	$	6,980	$	269
Counterparty positions with financial institutions    in an asset position		207,225		19,773		212,570		16,310
Total included in other assets			$	19,784			$	16,579
Included in accrued expenses and other liabilities:
Interest rate swaps with loan customers in a    liability position	$	204,975	$	19,784	$	205,590	$	16,579
Counterparty positions with financial institutions    in a liability position		—		—		—		—
Total included in accrued expenses and    other liabilities			$	19,784			$	16,579
Gross notional positions with customers	$	207,225			$	212,570
Gross notional positions with financial institution    counterparties	$	207,225			$	212,570

The presentation for derivatives for the current and prior periods was revised to present derivative positions net for customer positions. Fair value of swap assets and liabilities for the prior period was not impacted.

The effect of swap fair value changes on the Consolidated Statement of Operations 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	September 30, 2023		September 30, 2022
Interest rate swaps related to customer loans	Other income	$	—	$	—
Total		$	—	$	—

The Company monitors and controls all derivative products with a comprehensive Board of Director approved commercial loan swap policy. All interest rate swap 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 fair value of derivatives in other noninterest income in the Consolidated Statements of Operation.

At September 30, 2023 and December 31, 2022, the Company did not have any cash or securities pledged for collateral on its interest rate swaps with third party financial institutions. Cash pledged for collateral on interest rate swaps is classified as restricted cash on the Consolidated Balance Sheet.