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INTEREST RATE SWAPS

3 Months Ended

Mar. 31, 2024

INTEREST RATE SWAPS

INTEREST RATE SWAPS

12. 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, 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 counterparty 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 therefore, has no credit risk.

A summary of the Bank’s interest rate swaps related to clients is included in the following table:


				March 31, 2024						December 31, 2023
				Notional						Notional
(in thousands)		Bank Position		Amount			Fair Value			Amount			Fair Value

Interest rate swaps with Bank clients - Assets		Pay variable/receive fixed		$	131,515		$	1,602		$	120,442		$	4,066
Interest rate swaps with Bank clients - Liabilities		Pay variable/receive fixed			100,463			(6,311)			95,820			(4,867)
Interest rate swaps with Bank clients - Total		Pay variable/receive fixed		$	231,978		$	(4,709)		$	216,262		$	(801)

Offsetting interest rate swaps with institutional swap dealer - Assets		Pay fixed/receive variable			100,463			6,311			95,820			4,867
Offsetting interest rate swaps with institutional swap dealer - Liabilities		Pay fixed/receive variable			131,515			(1,602)			120,442			(4,066)
Offsetting interest rate swaps with institutional swap dealer - Total		Pay fixed/receive variable		$	231,978		$	4,709		$	216,262		$	801

Total				$	463,956		$	—		$	432,524		$	—

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 March 31, 2024 and December 31, 2023, the Bank’s counterparties had cash of $5.3 million and $1.9 million pledged to the Bank, which were included in Interest-bearing deposits on the Company’s Balance Sheet. Conversely, the Bank had $178,000 and $1.0 million pledged to its counterparties as of March 31, 2024 and December 31, 2023, which were included in Cash and cash equivalents on the Company’s Balance Sheet.