Annual report pursuant to Section 13 and 15(d)

DERIVATIVES

v3.24.0.1
DERIVATIVES
12 Months Ended
Dec. 31, 2023
Derivatives [Abstract]  
Derivatives
 
Note 5
DERIVATIVES
 
The Company enters into derivative financial instruments to manage exposures
 
that arise from business activities that result in the
receipt or payment of future known and uncertain cash amounts, the value of
 
which are determined by interest rates.
 
The
Company’s derivative financial
 
instruments are used to manage differences in the amount, timing,
 
and duration of the Company’s
known or expected cash receipts and its known or expected cash payments
 
principally related to the Company’s
 
subordinated
debt.
 
Cash Flow Hedges of Interest Rate Risk
Interest rate swaps with notional amounts totaling $
30
 
million at December 31, 2023 and 2022 were designated as a cash flow
hedge for subordinated debt.
 
Under the swap arrangement, the Company will pay a fixed interest rate of
2.50
% and receive a
variable interest rate based on three-month CME Term
 
SOFR (secured overnight financing rate).
 
For derivatives designated and that qualify as cash flow hedges of interest rate
 
risk, the gain or loss on the derivative is recorded
in accumulated other comprehensive loss (“AOCI”) and subsequently
 
reclassified into interest expense in the same period(s)
during which the hedged transaction affects earnings. Amounts
 
reported in accumulated other comprehensive loss related to
derivatives will be reclassified to interest expense as interest payments are
 
made on the Company’s variable-rate
 
subordinated
debt.
The following table reflects the cash flow hedges included in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
Statement of Financial
Notional
Fair
 
Weighted Average
(Dollars in Thousands)
Condition Location
 
Amount
Value
 
Maturity (Years)
Interest rate swaps related to subordinated debt:
December 31, 2023
Other Assets
$
30,000
$
5,317
 
6.5
December 31, 2022
Other Assets
$
30,000
$
6,195
 
7.5
The following table presents the net gains (losses) recorded in AOCI and
 
the Consolidated Statement of Income related to the
cash flow derivative instruments (interest rate swaps related to subordinated debt).
 
 
 
 
 
 
 
 
 
Amount of Gain
Amount of Gain
(Loss) Recognized
(Loss) Reclassified
(Dollars in Thousands)
Category
in AOCI
from AOCI to Income
December 31, 2023
Interest Expense
$
3,969
 
$
1,395
 
December 31, 2022
Interest Expense
$
4,625
 
$
337
 
December 31, 2021
Interest Expense
$
1,530
 
$
(151)
The Company estimates there will be approximately $
1.3
 
million reclassified as a decrease to interest expense within the next 12
months.
At December 31, 2023 and 2022, the Company had a collateral liability of
 
$
5.5
 
million and $
5.8
 
million, respectively.