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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments: Interest Rate Swaps The Company maintains an interest rate protection program for commercial loan customers. Under this program, the Company provides a variable rate loan while creating a fixed rate loan for the customer by the customer entering into an interest rate swap with terms that match the loan. The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution. The Company had interest rate swaps associated with commercial loans with a notional value of $70.2 million and fair value of $2.7 million in other assets and $2.7 million in other liabilities at September 30, 2024. At December 31, 2023, the Company had interest rate swaps associated with commercial loans with a notional value of $63.9 million and fair value of $4.2 million in other assets and $4.2 million in other liabilities. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. There were no net gains or losses for interest rate swaps for the either the three or the nine month periods ended September 30, 2024 and 2023. Interest Rate Swap Designated as a Fair Value Hedge The Company has one interest rate swap with a notional amount of $100.0 million that was in place at both September 30, 2024 and December 31, 2023. This swap is designated as a fair value hedge to mitigate the risk of further interest rate increases and the subsequent impact on the valuation of the company’s state and political subdivision municipal bond portfolio. The gross aggregate fair value of the swap at September 30, 2024 was $(1.4) million and was recorded as a $(1.5) million mark to market adjustment in other assets and $152 thousand was recorded to other assets for the accrued interest receivable. At December 31, 2023, the gross aggregate fair value of the swap was $(836) thousand and was recorded as a $(1.3) million mark to market adjustment in other liabilities, and $425 thousand was recorded to other assets for the accrued interest receivable. The Company expects the hedge to remain in effect for the remaining term of the swap, which matures August 2026. A summary of the interest rate swap designated as a fair value hedge is presented below:
|  | September 30, 2024 |  |  | December 31, 2023 |
Notional amount fair value hedge |  | $ | 100,000 |  |  | $ | 100,000 |
Fixed pay rates |  |  | 4.35 | % |  |  | 4.35 | %
Variable SOFR receive rates |  |  | 4.96 | % |  |  | 5.38 | %
Remaining maturity (in years) |  |  | 1.8 |  |  |  | 2.6 |
Fair value |  | $ | (1,392 | ) |  | $ | (836 | )
Mortgage Banking Derivatives Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third-party investors are considered derivatives. The Company enters into forward commitments for the future delivery of residential mortgage loans when the interest rate locks are committed in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. The net gains (losses) relating to non-designated derivative instruments used for risk management are included in Net Gains on Sale of Loans on the Consolidated Statements of Income and are summarized below for the quarters ended September 30, 2024 and September 30, 2023:
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | September 30, |
|  | 2024 |  |  |  | 2023 |  |  |  | 2024 |  |  |  | 2023 |
Forward sales contracts | $ | (18 | ) |  | $ | 22 |  |  | $ | 0 |  |  | $ | 6 |
Interest rate lock commitments |  | 43 |  |  |  | (76 | ) |  |  | (12 | ) |  |  | (19 | )
The following table reflects the amount and fair value of mortgage banking derivatives included in the Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023:
|  | September 30, 2024 |  |  | December 31, 2023 |
|  | Notional |  |  | Fair |  |  | Notional |  |  | Fair |
|  | Amount |  |  | Value |  |  | Amount |  |  | Value |
| Included in other assets: |  |  |  |  |  |  |  |  |  |  |
| Forward sales contracts | $ | 361 |  |  | $ | 2 |  |  | $ | 0 |  |  | $ | 0 |
| Interest rate lock commitments |  | 9,454 |  |  |  | 96 |  |  |  | 7,400 |  |  |  | 109 |
| Mortgage banking derivative |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
| Total included in other assets | $ | 9,815 |  |  | $ | 98 |  |  | $ | 7,400 |  |  | $ | 109 |
| Included in other liabilities: |  |  |  |  |  |  |  |  |  |  |
| Mortgage banking derivative | $ | 9,500 |  |  | $ | (14 | ) |  | $ | 3,300 |  |  | $ | (14 | )

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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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