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Note 15 - Derivative Financial Instruments

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 15 – Derivative Financial Instruments

The Company uses derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities. The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Consolidated Balance Sheet and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (i.e., interest rate lock commitment). The interest rate lock commitments are considered derivatives and are recorded on the accompanying consolidated balance sheets at fair value in accordance with FASB ASC 815, Derivatives and Hedging.

The following table shows the amounts of non-hedging derivative financial instruments:

December 31, 2024
		Notational or			Asset derivatives						Liability derivatives
(Dollars in thousands)		contractual amount			Statement of Financial Condition classification		Fair value				Statement of Financial Condition classification				Fair value
Interest rate swap contracts		$	89,964		Other assets		$	5,486			Other liabilities				$	5,486
Interest rate lock commitments			1,426		Other assets			24			N/A					-
Total		$	91,390				$	5,510							$	5,486

December 31, 2023
		Notational or			Asset derivatives						Liability derivatives
(Dollars in thousands)		contractual amount			Statement of Financial Condition classification		Fair value				Statement of Financial Condition classification				Fair value
Interest rate swap contracts		$	86,995		Other assets		$	5,591			Other liabilities				$	5,591
Interest rate lock commitments			2,071		Other assets			35			N/A					-
Total		$	89,066				$	5,626							$	5,591

The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments:

			For the year ended
(Dollars in thousands)	Statement of Income Classification		2024				2023
Interest rate swap contracts	Fees and service charges		$	276			$	387
Interest rate lock commitments	Gain on sale of loans held-for-sale, net			47				(3	)
Total			$	323			$	384

The following table shows the offsetting of financial assets and derivative assets:

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in		Gross Amounts of				Gross Amounts Offset in the				Net Amounts of Assets Presented				Financial				Cash Collateral
thousands)		Recognized Assets				Statement of Financial Condition				in the Statement of Financial Condition				Instruments				Received				Net Amount
December 31, 2024
Interest rate swap contracts		$	5,486			$	-			$	5,486			$	-			$	5,120			$	366
Interest rate lock commitments			82				-				82				-				-				82
Total		$	5,568			$	-			$	5,568			$	-			$	5,120			$	448

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in		Gross Amounts of				Gross Amounts Offset in the				Net Amounts of Liabilities Presented				Financial				Cash Collateral
thousands)		Recognized Liabilities				Statement of Financial Condition				in the Statement of Financial Condition				Instruments				Received				Net Amount
December 31, 2023
Interest rate swap contracts		$	5,591			$	-			$	5,591			$	-			$	4,050			$	1,541
Interest rate lock commitments			35				-				35				-				-				35
Total		$	5,626			$	-			$	5,626			$	-			$	4,050			$	1,576

The following table shows the offsetting of financial liabilities and derivative liabilities:

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in		Gross Amounts of				Gross Amounts Offset in the				Net Amounts of Liabilities Presented				Financial				Cash Collateral
thousands)		Recognized Liabilities				Statement of Financial Condition				in the Statement of Financial Condition				Instruments				Pledged				Net Amount
December 31, 2024
Interest rate swap contracts		$	5,486			$	-			$	5,486			$	-			$	-			$	5,486
Total		$	5,486			$	-			$	5,486			$	-			$	-			$	5,486

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in		Gross Amounts of				Gross Amounts Offset in the				Net Amounts of Liabilities Presented				Financial				Cash Collateral
thousands)		Recognized Liabilities				Statement of Financial Condition				in the Statement of Financial Condition				Instruments				Pledged				Net Amount
December 31, 2023
Interest rate swap contracts		$	5,591			$	-			$	5,591			$	-			$	-			$	5,591
Total		$	5,591			$	-			$	5,591			$	-			$	-			$	5,591

X

- 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

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X

- References

No definition available.

+ Details

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