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INTEREST RATE SWAPS

12 Months Ended

Dec. 31, 2023

INTEREST RATE SWAPS

INTEREST RATE SWAPS

8.	INTEREST RATE SWAPS

Non-hedge Interest Rate Swaps

The Bank enters into interest rate swaps to facilitate client transactions and meet their financing needs. Upon entering into these instruments to meet client needs, the Bank enters into offsetting positions in order to minimize the Bank’s interest rate risk. These swaps are derivatives, but are not designated as hedging instruments, and therefore changes in fair value are reported in current year earnings.

Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counter party or client owes the Bank, and results in credit risk to the Bank. When the fair value of a derivative instrument contract is negative, the Bank owes the client or counterparty and has no credit risk.

A summary of the Bank’s interest rate swaps related to clients as of December 31, 2023 and 2022 is included in the following table:


					2023						2022
					Notional						Notional
December 31, (in thousands)		Bank Position			Amount			Fair Value			Amount			Fair Value

Interest rate swaps with Bank clients - Assets		Pay variable/receive fixed			$	120,442		$	4,066		$	40,032		$	1,386
Interest rate swaps with Bank clients - Liabilities		Pay variable/receive fixed				95,820			(4,867)			91,636			(6,742)
Interest rate swaps with Bank clients - Total		Pay variable/receive fixed			$	216,262		$	(801)		$	131,668		$	(5,356)

Offsetting interest rate swaps with institutional swap dealer - Assets		Pay fixed/receive variable				95,820			4,867			91,636			6,742
Offsetting interest rate swaps with institutional swap dealer - Liabilities		Pay fixed/receive variable				120,442			(4,066)			40,032			(1,386)
Offsetting interest rate swaps with institutional swap dealer - Total		Pay fixed/receive variable			$	216,262		$	801		$	131,668		$	5,356

Total					$	432,524		$	—		$	263,336		$	—

The Bank and its counterparties are required to pledge securities or cash as collateral when either party is in a net loss position exceeding $250,000 with the other party. As of December 31, 2023 and 2022, the Bank’s counterparties had cash of $1.9 million and $3.6 million pledged to the Bank, which were included in Interest-bearing deposits on the Company’s Balance Sheet. Conversely, the Bank had $1.0 million and $901,000 pledged to its counterparties as of December 31, 2023 and 2022, which were included in Cash and cash equivalents on the Company’s Balance Sheet.