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DERIVATIVE INSTRUMENTS | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS On September 7, 2018, the Corporation executed an interest rate swap agreement with a 5-year term and an effective date of September 15, 2018 in order to hedge cash flows associated with $10.0 million of a subordinated trust preferred security that was issued by the Corporation during 2007 and elected cash flow hedge accounting for the agreement. The Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2018 to September 15, 2023 without the exchange of the underlying notional amount. The swap that expired on September 15, 2023 was not renewed. As of September 30, 2023 and December 31, 2022, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Corporation does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s condensed consolidated balance sheets and statements of income as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022:
|  |  | Fair value as of
| Balance Sheet Location |  | September 30, 2023 |  | December 31, 2022
Interest rate contracts | Accrued interest receivable (payable) and other assets ( liabilities) |  | $ | — |  |  | $ | 150 |
For the Three Months Ended September 30, 2023 | (a) |  | (b) |  | (c) |  | (d) |  | (e)
Interest rate contracts | $ | (51) |  |  | Interest expense – subordinated notes and debentures |  | $ | (55) |  |  | Other income |  | $ | — |
For the Nine Months Ended September 30, 2023 | (a) |  | (b) |  | (c) |  | (d) |  | (e)
Interest rate contracts | $ | (119) |  |  | Interest expense – subordinated notes and debentures |  | $ | (151) |  |  | Other income |  | $ | — |
For the Three Months Ended September 30, 2022 | (a) |  | (b) |  | (c) |  | (d) |  | (e)
Interest rate contracts | $ | 88 |  |  | Interest expense – subordinated notes and debentures |  | $ | (26) |  |  | Other income |  | $ | — |
For the Nine Months Ended September 30, 2022 | (a) |  | (b) |  | (c) |  | (d) |  | (e)
Interest rate contracts | $ | 410 |  |  | Interest expense – subordinated notes and debentures |  | $ | (144) |  |  | Other income |  | $ | — |
(a)Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax (b)Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion) (c)Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion) (d)Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) (e)Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) As of September 30, 2023 and December 31, 2022, cash collateral balances in the amount of zero and $200 thousand were maintained, respectively, with a counterparty to the interest rate swaps. These balances are included in interest-bearing deposits with other banks on the condensed consolidated balance sheets. The Corporation entered into certain interest rate swap contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Corporation enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each swap transaction, the Corporation agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. Concurrently, the Corporation agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the Corporation’s customers to effectively convert a variable rate loan to a fixed rate. Because the Corporation acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts offset each other and do not impact the Corporation’s results of operations. The Corporation pledged cash collateral to another financial institution with a balance $173 thousand as of September 30, 2023 and December 31, 2022. This balance is included in cash and cash equivalents due from banks on the condensed consolidated balance sheets. The Corporation may require its customers to post cash or securities as collateral on its program of back-to-back swaps depending upon the specific facts and circumstances surrounding each loan and individual swap. In addition, certain language is included in the International Swaps and Derivatives Association agreement and loan documents where, in default situations, the Corporation is permitted to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Corporation may be required to post additional collateral to swap counterparties in the future in proportion to potential increases in unrealized loss positions. Effective on September 30, 2023 the Corporation amended all of the back-to-back swap contracts to reference the 1-month SOFR plus a credit spread adjustment of 11.448 basis points "Fallback SOFR." The following table provides information about the amounts and locations of activity related to the back-to-back interest rate swaps within the Corporation’s condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022:
| Notional Amount |  | Weighted Average Maturity (in years) |  | Weighted Average Fixed Rate |  | Weighted Average Variable Rate |  | Fair Value |  |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |
3rd Party interest rate swaps | $ | 21,572 |  |  | 5.12 |  | 4.19 | % |  | 1 month Fallback SOFR + 1.79% |  | $ | 1,726 |  |  | (a)
Customer interest rate swaps | (21,572) |  |  | 5.12 |  | 4.19 | % |  | 1 month Fallback SOFR + 1.79% |  | (1,726) |  |  | (b)
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
3rd Party interest rate swaps | $ | 31,417 |  |  | 4.9 |  | 4.12 | % |  | 1 month LIBOR + 1.68% |  | $ | 1,700 |  |  | (a)
Customer interest rate swaps | (31,417) |  |  | 4.9 |  | 4.12 | % |  | 1 month LIBOR + 1.68% |  | (1,700) |  |  | (b)
(a)Reported in accrued interest receivable and other assets within the condensed consolidated balance sheets (b)Reported in accrued interest payable and other liabilities within the condensed consolidated balance sheets Risk Participation Agreements The Corporation entered into a Risk Participation Agreement ("RPA") swap with another financial institution related to a loan in which the Corporation is a participant. The RPA provides credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. The notional amount of this contingent agreement is $14.0 million as of September 30, 2023 and zero as of December 31, 2022.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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