Derivatives Hedging Instruments

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 22 - DERIVATIVE HEDGING INSTRUMENTS

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:


	2023				2022
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets:
Interest rate swaps with loan customers in an asset position	$	44,773	$	2,114	$	6,980	$	269
Counterparty positions with financial institutions in an asset position		228,873		10,367		212,570		16,310
Total included in other assets			$	12,481			$	16,579

Included in accrued expenses and other liabilities:
Interest rate swaps with loan customers in a liability position	$	184,100	$	12,481	$	205,590	$	16,579
Counterparty positions with financial institutions in an asset position		—		—		—		—
Counterparty positions with financial institutions in a liability position		—		—		—		—
Total included in accrued expenses and other liabilities			$	12,481			$	16,579

Gross notional positions with customers	$	228,873			$	212,570
Gross notional positions with financial institution counterparties	$	228,873			$	212,570

The effect of swap fair value changes on the Consolidated Statement of Operations for the years ended December 31, 2023, 2022 and 2021 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	2023		2022		2021
Interest rate swaps related to customer loans	Other income	$	—	$	—	$	64
Total		$	—	$	—	$	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 $673 and $247 during the years ended December 31, 2023 and 2022, respectively.

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, 2023 or 2022.