Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVES

v3.24.3
DERIVATIVES
9 Months Ended
Sep. 30, 2024
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 September 30, 2024 were designed 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 income (“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 income 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)
September 30, 2024
Interest rate swaps related to subordinated debt
Other Assets
$
30,000
$
4,444
5.8
December 31, 2023
Interest rate swaps related to subordinated debt
Other Assets
$
30,000
$
5,317
6.5
The following table presents the change in net gains (losses) recorded
 
in AOCI and the consolidated statements of income related to
the cash flow derivative instruments (interest rate swaps related to subordinated
 
debt) for the three and nine months ended September
30, 2024.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in Gain
 
Amount of Gain
(Loss) Recognized
(Loss) Reclassified
(Dollars in Thousands)
Category
in AOCI
from AOCI to Income
Three months ended September 30, 2024
Interest expense
$
(941)
$
377
 
Three months ended September 30, 2023
Interest expense
574
 
375
 
Nine months ended September 30, 2024
Interest expense
$
(652)
$
1,128
 
Nine months ended September 30, 2023
Interest expense
413
 
1,016
The Company estimates there will be approximately $
1.0
 
million reclassified as a decrease to interest expense within the next 12
months.
The Company had a collateral liability of $
4.4
 
million and $
5.5
 
million at September 30, 2024 and December 31, 2023, respectively.