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DERIVATIVE INSTRUMENTS | 9 Months Ended
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Sep. 30, 2024
DERIVATIVE INSTRUMENTS |
DERIVATIVE INSTRUMENTS | NOTE L: DERIVATIVE INSTRUMENTS The Company is party to derivative financial instruments in the normal course of its business to meet the financing needs of its customers and to manage its exposure to fluctuation in interest rates and credit risk. These financial instruments have been limited to interest rate swap agreements and risk participation agreements. The Company does not hold or issue derivative financial instruments for trading or other speculative purposes. Interest Rate Swaps The Company enters into interest rate swaps to assist customers in managing their interest rate risk. These swaps are considered derivatives, but are not designated in hedging relationships. These instruments have associated interest rate and credit risk. To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties, which are also considered derivatives and are not designated in hedging relationships. Interest rate swaps are recorded within other assets or accrued interest and other liabilities on the consolidated statements of condition at their estimated fair value. The terms of the interest rate swaps with the customer and the counterparties offset each other, with the only difference being counterparty credit risk. Any changes in the fair value of the underlying derivative contracts are reported in other banking services noninterest revenue in the consolidated statements of income. Risk Participation Agreements The Company may enter into a risk participation agreement (“RPA”) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed, referred to as an “RPA sold”. In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Company has provided a loan structured with a derivative, the Company may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared, referred to as an “RPA purchased”. Forward Sales Commitments The Company enters into forward sales commitments for the future delivery of residential mortgage loans, and interest rate lock commitments to fund loans at a specified interest rate. The forward sales commitments are utilized to reduce interest rate risk associated with interest rate lock commitments and loans held for sale. Changes in the estimated fair value of the forward sales commitments and interest rate lock commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. At inception and during the life of the interest rate lock commitment, the Company includes the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of the interest rate lock commitments. Notional values and fair values of derivative instruments as of September 30, 2024 are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2024
​ | ​ | Derivative Assets | ​ | Derivative Liabilities
​ | ​ | ​ | ​ | Consolidated | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Consolidated | ​ | ​ | ​
​ | ​ | Notional | ​ | Statement of | ​ | ​ | ​ | ​ | Notional | ​ | Statement of | ​ | ​ | ​
(000’s omitted) | ​ | Amount | ​ | Condition Location | ​ | Fair Value | ​ | Amount | ​ | Condition Location | ​ | Fair Value
Derivatives not designated as hedging instruments under Subtopic 815-20: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |  |  |  | ​ |
Commitments to originate real estate loans for sale | ​ | $ | 13,940 |  | ​ | Other assets | ​ | $ | 329 | ​ | $ | 0 |  | Accrued interest and other liabilities | ​ | $ | 0
Interest rate swaps | ​ |  | 170,250 |  | ​ | Other assets | ​ |  | 5,017 | ​ |  | 170,250 |  | Accrued interest and other liabilities | ​ |  | 5,017
RPA sold | ​ | ​ | 0 | ​ | ​ | Other assets | ​ | ​ | 0 | ​ | ​ | 12,389 | ​ | Accrued interest and other liabilities | ​ | ​ | 0
RPA purchased | ​ |  | 46,474 |  | ​ | Other assets | ​ |  | 0 | ​ |  | 0 |  | Accrued interest and other liabilities | ​ |  | 0
Total derivatives | ​ | $ | 230,664 | ​ | ​ | ​ | ​ | $ | 5,346 | ​ | $ | 182,639 |  |  | ​ | $ | 5,017
​ The Company’s derivative instruments as of December 31, 2023 were immaterial. The notional amount for interest rate swaps represents the underlying principal amount used to calculate interest payments that are exchanged periodically. The notional amount for risk participation agreements represents the amount of exposure assumed or shared in case of borrower default. The notional amount for commitments to originate real estate loans for sale represents the unpaid principal amount of loans that have been committed to originate. Fee income earned on interest rate swaps and risk participation agreements is recognized in other banking services noninterest revenues in the consolidated statements of income during the period the derivative instrument is executed. During the three and nine months ended September 30, 2024, the Company recognized $1.0 million and $1.4 million, respectively, of fee income associated with interest rate swaps and risk participation agreements. Cash collateral is posted by the Company with counterparties to secure certain derivatives, which is restricted cash and is included in cash and cash equivalents on the consolidated statements of condition. The amount of such collateral at September 30, 2024 was $5.1 million. The Company assessed its counterparty risk at September 30, 2024 and December 31, 2023 and determined any credit risk inherent in our derivative contracts was not material. Further information about the fair value of derivative financial instruments can be found in Note K to these consolidated financial statements.

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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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