XML 22 R12.htm IDEA: XBRL DOCUMENT
v3.24.2.u1

DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended
--- | ---
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS Risk Management Objective of Using Derivatives The Corporation is exposed to certain risks arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use of derivative financial instruments. Specifically, the Corporation 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 Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash payments principally related to certain variable-rate liabilities. The Corporation also has derivatives that are a result of a service the Corporation provides to certain qualifying customers, and, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities. The Corporation manages a matched book with respect to its derivative instruments offered as a part of this service to its customers in order to minimize its net risk exposure resulting from such transactions. Derivatives Designated as Hedges The Corporation’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Corporation primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the payment of fixed amounts to a counterparty in exchange for the Corporation receiving variable payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. As of June 30, 2024 and December 31, 2023 the Corporation had no interest rate swaps or caps designated as hedges. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss). The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2024 and 2023, the Corporation did not recognize any ineffectiveness. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Corporation's variable-rate liabilities. During the next twelve months, the Corporation doesn't expect to reclassify income (loss) from accumulated other comprehensive income (loss) to interest income. The amount of gain (loss) recognized in other comprehensive income (loss) is included in the table below for the periods indicated.
Derivatives in Cash Flow Hedging Relationships | Amount of Loss Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)
Three Months Ended |  | Six Months Ended
June 30, 2024 |  | June 30, 2023 |  | June 30, 2024 |  | June 30, 2023
Interest Rate Products | $ | — |  |  | $ | (62) |  |  | $ | — |  |  | $ | (113) |
The amount of gain (loss) reclassified from other comprehensive income (loss) into income related to cash flow hedging relationships is included in the tables below for the periods indicated.
Derivatives Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized Income on Derivative |  | Amount of Gain Reclassed from Other Comprehensive Income (Loss) into Income (Effective Portion)
|  | Three Months Ended June 30, 2024 |  | Three Months Ended June 30, 2023
Interest rate contracts |  | Interest Expense |  | $ | — |  |  | $ | (16) |
Derivatives Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized Income on Derivative |  | Amount of Gain Reclassed from Other Comprehensive Income (Loss) into Income (Effective Portion)
|  | Six Months Ended June 30, 2024 |  | Six Months Ended June 30, 2023
Interest rate contracts |  | Interest Expense |  | $ | — |  |  | $ | (15) |
Non-designated Hedges The Corporation does not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers. The Corporation executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Corporation executes with a third party, such that the Corporation minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Corporation's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated in hedge relationships. Fair values were estimated based on changes in mortgage interest rates from the date of the commitments. Changes in the fair value of these mortgage banking derivatives are included in net gains and fees on sales of loans. The table below presents the fair value of the Corporation’s non-designated hedges, as well as their classification on the Consolidated Condensed Balance Sheet, as of June 30, 2024, and December 31, 2023.
| June 30, 2024 |  | December 31, 2023
| Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Included in other assets: |  |  |  |  |  |  |
Interest rate swaps | $ | 1,299,892 |  |  | $ | 86,965 |  |  | $ | 1,355,947 |  |  | $ | 78,743 |
Forward contracts related to mortgage loans to be delivered for sale | 46,801 |  | 605 |  | 15,160 |  | 469
Interest rate lock commitments | 27,375 |  | 207 |  | 22,706 |  | 167
Included in other assets | $ | 1,374,068 |  |  | $ | 87,777 |  |  | $ | 1,393,813 |  |  | $ | 79,379 |
Included in other liabilities: |  |  |  |  |  |  |
Interest rate swaps | $ | 1,299,892 |  |  | $ | 87,015 |  |  | $ | 1,355,947 |  |  | $ | 78,811 |
Forward contracts related to mortgage loans to be delivered for sale | 30,948 |  | 129 |  | 25,290 |  | 191
Interest rate lock commitments | 22,283 |  | 92 |  | 1,025 |  | 6
Included in other liabilities | $ | 1,353,123 |  |  | $ | 87,236 |  |  | $ | 1,382,262 |  |  | $ | 79,008 |
In the normal course of business, the Corporation may decide to settle a forward contract rather than fulfill the contract. Cash received or paid in this settlement manner is included in "Net gains and fees on sales of loans" in the Consolidated Condensed Statements of Income and is considered a cost of executing a forward contract. The amount of gain (loss) recognized into income related to non-designated hedging instruments is included in the tables below for the periods indicated.
Derivatives Not Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized Income on Derivative |  | Amount of Gain (Loss) Recognized into Income on Derivatives
|  |  |  | Three Months Ended June 30, 2024 |  | Three Months Ended June 30, 2023
Forward contracts related to mortgage loans to be delivered for sale |  | Net gains and fees on sales of loans |  | $ | 395 |  |  | $ | 604 |
Interest rate lock commitments |  | Net gains and fees on sales of loans |  | (33) |  |  | (220) |
Total net gain (loss) recognized in income |  |  |  | $ | 362 |  |  | $ | 384 |
Derivatives Not Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized Income on Derivative |  | Amount of Gain (Loss) Recognized into Income on Derivatives
|  |  |  | Six Months Ended June 30, 2024 |  | Six Months Ended June 30, 2023
Forward contracts related to mortgage loans to be delivered for sale |  | Net gains and fees on sales of loans |  | $ | 393 |  |  | $ | 709 |
Interest rate lock commitments |  | Net gains and fees on sales of loans |  | (45) |  |  | (33) |
Total net gain/(loss) recognized in income |  |  |  | $ | 348 |  |  | $ | 676 |
The Corporation’s exposure to credit risk occurs because of nonperformance by its counterparties. The counterparties approved by the Corporation are usually financial institutions, which are well capitalized and have credit ratings through Moody’s and/or Standard & Poor’s at or above investment grade. The Corporation’s control of such risk is through quarterly financial reviews, comparing mark-to-market values with policy limitations, credit ratings and collateral pledging. Credit-risk-related Contingent Features The Corporation has agreements with certain of its derivative counterparties that contain a provision where if the Corporation fails to maintain its status as a well or adequately capitalized institution, then the Corporation could be required to terminate or fully collateralize all outstanding derivative contracts. Additionally, the Corporation has agreements with certain of its derivative counterparties that contain a provision where if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations. As of June 30, 2024, the termination value of derivatives in a net liability position related to these agreements was $3.4 million, which resulted in no collateral pledged to counterparties as of June 30, 2024. While the Corporation did not breach any of these provisions as of June 30, 2024, if it had, the Corporation could have been required to settle its obligations under the agreements at their termination value.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

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 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration