Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVES

v3.21.1
DERIVATIVES
3 Months Ended
Mar. 31, 2021
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 March 31, 2021 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 LIBOR plus a weighted average margin
 
of
1.83
%.
 
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
Notional
Fair
 
Balance Sheet
Weighted Average
(Dollars in Thousands)
 
Amount
Value
Location
 
Maturity (Years)
March 31, 2021
Interest rate swaps related to subordinated debt
$
30,000
$
2,699
Other Assets
9.3
December 31, 2020
Interest rate swaps related to subordinated debt
$
30,000
$
574
Other Assets
9.5
The following table presents the 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 month period ended March
 
31, 2021.
Amount of Gain
Amount of Gain
(Loss) Recognized
(Loss) Reclassified
(Dollars in Thousands)
in AOCI
Category
from AOCI to Income
Three months ended March 31, 2021
$
1,587
 
Interest Expense
$
(33)
The Company estimates there will be approximately
 
$
0.1
 
million reclassified as an increase to interest expense within
 
the next 12
months.
 
The Company had a collateral liability of $
2.6
 
million and $
0.5
 
million at March 31, 2021 and December 31, 2020, respectively.