The Bank 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 Bank receives a floating rate. These back-to-back loan swaps are derivative financial instruments and are reported at fair value in “accrued interest receivable and other assets” and “accrued interest payable 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 swaps with borrowers and swaps with dealer counterparties.

CFBank utilizes interest-rate swaps as part of its asset liability management strategy to help manage its interest rate risk position and does not use derivatives for trading purposes. The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements. CFBank was party to interest-rate swaps with a combined notional amount of $81,858, $42,177 and $44,887 at December 31, 2023, 2022 and 2021, respectively.

The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position. At December 31, 2023, CFBank had $3,394 in cash pledged as collateral for these derivatives. Should the liability increase beyond the collateral value, CFBank may be required to pledge additional collateral.

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards and to comply with certain other regulatory requirements. The interest-rate swaps may be called by the counterparty if CFBank fails to maintain well-capitalized status under regulatory capital standards or becomes subject to certain adverse regulatory events such as a regulatory cease and desist order. As of December 31, 2023, CFBank was well-capitalized under regulatory capital standards and was not subject to any adverse regulatory events specified in CFBank’s interest-rate swap instruments.


	2023		2022		2021
Notional amount	$	81,858	$	42,177	$	44,887
Weighted average pay rate on interest-rate swaps		5.36%		4.34%		4.21%
Weighted average receive rate on interest-rate swaps		7.81%		6.21%		3.00%
Weighted average maturity (years)		8.2		7.7		6.9
Fair value of derivative asset	$	4,710	$	4,233	$	538
Fair value of derivative liability	$	(4,710)	$	(4,233)	$	(538)

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market are considered derivatives. These mortgage banking derivatives are not designated in hedge relationships. Early in 2021, we strategically scaled down and repositioned our Residential Mortgage Business as a result of the shifts in the residential mortgage industry and, during the second

quarter of 2022, we exited the direct-to-consumer mortgage business in favor of lending in our regional markets. The Company had $5,345, $3,940 and $50,312 of interest rate lock commitments related to residential mortgage loans at December 31, 2023, 2022, and 2021, respectively. The fair value of these mortgage banking derivatives was reflected by a derivative asset was immaterial at December 31, 2023 and 2022 and $555 at December 31, 2021, which was included in other assets in the consolidated balance sheet. Fair values were estimated based on anticipated gains on the sale of the underlying loans. Changes in the fair values of these mortgage banking derivatives are included in net gains on sales of loans.

Mortgage banking activities include two types of commitments: rate lock commitments and forward loan commitments. Rate lock commitments are loans in our pipeline that have an interest rate locked with the customer. The commitments are generally for periods of 30-60 days and are at market rates. In order to mitigate the effect of the interest rate risk inherent in providing rate lock commitments, we economically hedge our commitments by entering into either a forward loan sales contract under best efforts or a trade of “to be announced (TBA)” mortgage-backed securities (“notional securities”) for mandatory delivery. The Company had no TBA mortgage-backed securities at December 31, 2023 and 2022.

The following table reflects the amount and market value of mortgage banking derivatives included in the consolidated balance sheet as of the period end:


	December 31, 2023				December 31, 2022
	(unaudited)
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets (Liabilities):
Interest rate commitments	$	5,345	$	-	$	3,940	$	-

The following table represents the notional amount of loans sold during the years ended December 31, 2023, 2022 and 2021:


	December 31, 2023		December 31, 2022		December 31, 2021
Notional amount of loans sold	$	10,799	$	97,265	$	2,358,510

The following table represents the revenue recognized on mortgage activities for the years ended December 31, 2023, 2022 and 2021:


	December 31, 2023		December 31, 2022		December 31, 2021
Gain (loss) on loans sold	$	119	$	(64)	$	21,646
Gain (loss) from change in fair value of loans held-for-sale		-		(356)		(8,408)
Gain (loss) from change in fair value of derivatives		-		1,076		(7,322)
	$	119	$	656	$	5,916