Note

16.

Derivative Financial Instruments

April 21, 2020,

the Company entered into

two

interest rate swap agreements related to its outstanding junior subordinated debt. One swap agreement was related to the Company's junior subordinated debt with a redemption date of

June 17, 2034,

which became effective on

March 17, 2020.

The notional amount of the interest rate swap was

$5.0

million and terminates on

June 17, 2034.

Under the terms of the agreement, the Company pays interest quarterly at a fixed rate of

0.79%

and receives interest quarterly at a variable rate of

three

-month LIBOR. The variable rate resets on each interest payment date. The other swap agreement was related to the Company's junior subordinated debt with a redemption date of

October 1, 2036,

which became effective on

April 1, 2020.

The notional amount of the interest rate swap was

$4.0

million and terminates on

October 1, 2036.

Under the terms of the agreement, the Company pays interest quarterly at a fixed rate of

0.82%

and receives interest quarterly at a variable rate of

three

-month LIBOR. The variable rate resets on each interest payment date.

The Company entered into interest rate swaps to reduce interest rate risk and to manage interest expense. By entering into these agreements, the Company converted variable rate debt into fixed rate debt. Alternatively, the Company

may

enter into interest rate swap agreements to convert fixed rate debt into variable rate debt. Interest differentials paid or received under interest rate swap agreements are reflected as adjustments to interest expense. The Company designated the interest rate swaps as hedging instruments in qualifying cash flow hedges. Changes in fair value of these designated hedging instruments is reported as a component of other comprehensive (loss) income. Interest rate swaps designated as cash flow hedges are expected to be highly effective in offsetting the effect of changes in interest rates on the amount of variable rate interest payments, and the Company assesses the effectiveness of each hedging relationship quarterly. If the Company determines that a cash flow hedge is

longer highly effective, future changes in the fair value of the hedging instrument would be reported as earnings. As of

March 31, 2021

, the Company has designated cash flow hedges to manage its exposure to variability in cash flows on certain variable rate borrowings for periods that end between

June 2034

and

October 2036.

The notional amounts of the interest rate swaps were

not

exchanged and do

not

represent exposure to credit loss. In the event of default by a counterparty, the risk in these transactions is the cost of replacing the agreements at current market rates.

All interest rate swaps were entered into with counterparties that met the Company's credit standards and the agreements contain collateral provisions protecting the at-risk party. The Company believes that the credit risk inherent in these derivative contracts is

not

significant.

Unrealized gains or losses recorded in other comprehensive (loss) income related to cash flow hedges are reclassified into earnings in the same period(s) during which the hedged interest payments affect earnings. When a designated hedging instrument is terminated and the hedged interest payments remain probable of occurring, any remaining unrecognized gain or loss in other comprehensive (loss) income is reclassified into earnings in the period(s) during which the forecasted interest payments affect earnings. Amounts reclassified into earnings and interest receivable or payable under designated interest rate swaps are reported in interest expense. The Company does

not

expect any unrealized losses related to cash flow hedges to be reclassified into earnings in the next

twelve

months.

The following table summarizes key elements of the Company's derivative instruments at

March 31, 2021

(in thousands):

	March 31, 2021
	Notional Amount		Assets		Liabilities		Collateral Pledged(1)
Cash Flow Hedges
Interest rate swap contracts	$	9,000	$	1,365	$	—	$	—

(

)

Collateral pledged

may

be comprised of cash or securities.