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Derivatives | 9 Months Ended
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Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | NOTE 15. Derivatives The Company uses derivative financial instruments primarily to manage risks to the Company associated with changing interest rates, and to assist customers with their risk management objectives. Derivative contracts that are not designated in a qualifying hedging relationships include customer accommodation loan swaps. On August 15, 2024, the Company executed a 2-year, 3.862% pay-fixed portfolio layer method fair value swap, designated as a hedging instrument, with a total notional amount of $35.0 million. This swap will terminate on August 15, 2026. The Company designated the fair value swap under the portfolio layer method ("PLM"). Under this method, the hedged item is designated as a hedged layer of a closed portfolio of financial loans that is anticipated to remain outstanding for the designated hedged period. Adjustments will be made to record the swap at fair value as either an other asset or other liability on the Consolidated Balance Sheets, with changes in fair value recognized in net loans. The carrying value of the fair value swap on the Consolidated Balance Sheets will also be adjusted through loan interest income, based on changes in the fair value attributable to changes in the hedged risk. The following table represents the carrying value of the portfolio layer method hedged asset and the cumulative fair value hedging adjustment included in the carrying value of the hedged asset as of September 30, 2024.
|  | September 30, 2024 |
|  | Carrying Amount of Hedged Asset |  |  | Cumulative Amount of Fair Value Adjustment |
|  | (in thousands) |
Loans receivable (1) |  | $ | 35,279 |  |  | $ | 279 |
(1) These amounts include the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the hedged period. As of September 30, 2024, the amortized cost basis of the closed portfolio used in this hedging relationship was $536.6 million and the cumulative basis adjustment associated with this hedging relationship was $272 thousand. At September 30, 2024, the amount of the designated hedged item was $35.0 million. The following table summarizes the effect of the fair value hedging relationship recognized in the consolidated statements of income for the three and nine months ended September 30, 2024.
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2024 |  |  | 2024 |
|  | (in thousands) |
Hedged asset |  | $ | 61 |  |  | $ | 61 |
Fair value derivative designated as hedging instrument |  |  | 7 |  |  |  | 7 |
Total gain recognized in the consolidated statement of income within interest and fees on loans |  | $ | 68 |  |  | $ | 68 |
The Company enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Bank simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and offsetting terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Company receives a floating rate. These back-to-back loan swaps are derivative financial instruments and are reported at fair value in “other assets” and “other liabilities” in the Consolidated Balance Sheets. Changes in the fair value of loan swaps are recorded in other noninterest income and sum to zero because of the offsetting terms of the swaps with borrowers and the swaps with dealer counterparties. The following tables summarize key elements of the Company's derivative instruments at September 30, 2024 and December 31, 2023.
|  | September 30, 2024 |
|  | Notional Amount |  |  | Assets |  |  | Liabilities |
|  | (in thousands) |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |
Fair value swap |  | $ | 35,000 |  |  | $ | — |  |  | $ | 272 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |
Customer-related interest rate swap contracts: |  |  |  |  |  |  |  |  |
Matched interest rate swaps with borrower |  | $ | 40,347 |  |  | $ | 701 |  |  | $ | 506 |
Matched interest rate swaps with counterparty |  |  | 40,347 |  |  |  | 506 |  |  |  | 701 |
|  | December 31, 2023 |
|  | Notional Amount |  |  | Assets |  |  | Liabilities |
|  | (in thousands) |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |
Customer-related interest rate swap contracts: |  |  |  |  |  |  |  |  |
Matched interest rate swaps with borrower |  | $ | 41,051 |  |  | $ | 844 |  |  | $ | 621 |
Matched interest rate swaps with counterparty |  |  | 41,051 |  |  |  | 621 |  |  |  | 844 |

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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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