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Derivative Instruments | 9 Months Ended
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Sep. 30, 2024
Derivative Instruments [Abstract] |
Derivative Instruments | NOTE 11 – DERIVATIVE INSTRUMENTS Interest-rate swaps: 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. CFBank enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The CFBank 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 CFBank 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 net to zero because of the offsetting terms of swaps with borrowers and swaps with dealer counterparties. 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 $90,617 at September 30, 2024 and $81,858 at December 31, 2023. The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position. At September 30, 2024, CFBank had $2,128 in cash pledged as collateral for these derivatives. Should the liability increase beyond the collateral value, CFBank will 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 September 30, 2024, 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. Summary information about the derivative instruments is as follows:
| September 30, 2024 |  | December 31, 2023
| (unaudited) |  |  |
Notional amount | $ | 90,617 |  | $ | 81,858
Weighted average pay rate on interest-rate swaps |  | 5.44% |  |  | 5.36%
Weighted average receive rate on interest-rate swaps |  | 7.62% |  |  | 7.81%
Weighted average maturity (years) |  | 8.6 |  |  | 8.2
Fair value of derivative asset | $ | 4,474 |  | $ | 4,710
Fair value of derivative liability |  | (4,474) |  |  | (4,710)
Mortgage banking derivatives: Mortgage banking activities include two types of commitments: rate lock commitments and forward loan sales 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 to 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 a forward loan sales contract under best efforts. 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. The Company had $11,649 of interest lock commitments related to residential mortgage loans at September 30, 2024 and $5,345 of interest rate lock commitments related to residential mortgage loans at December 31, 2023. The fair value of these interest lock commitments was immaterial at September 30, 2024 and December 31, 2023. The following table reflects the amount and market value of mortgage banking derivatives included in the Consolidated Balance Sheets as of the period end (in thousands):
| September 30, 2024 |  | December 31, 2023
| (unaudited) |  |  |  |  |  |
| Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Assets (Liabilities): |  |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments | $ | 11,649 |  | $ | - |  | $ | 5,345 |  | $ | -
The following table represents the notional amount of loans sold during the three and nine months ended September 30, 2024 and 2023 (unaudited):
| Three Months ended |  | Nine Months ended
| September 30, |  | September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Notional amount of loans sold | $ | 12,053 |  | $ | 3,646 |  | $ | 31,926 |  | $ | 8,809
The following table represents the gain (loss) recognized on mortgage activities for the three and nine months ended September 30, 2024 and 2023 (unaudited):
| Three Months ended |  | Nine Months ended
| September 30, |  | September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Gain on loans sold | $ | 110 |  | $ | 48 |  | $ | 287 |  | $ | 85
Gain (loss) from change in fair value of loans held-for-sale |  | - |  |  | - |  |  | - |  |  | -
| $ | 110 |  | $ | 48 |  | $ | 287 |  | $ | 85

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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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