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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, 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 interest bearing deposits. The Company’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 this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Beginning in June 2020, such derivatives were used to hedge the variable cash flows associated with interest bearing deposits. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item, the derivative is settled or terminated, or treatment of the derivative as a hedge is no longer appropriate or intended. During the three months ended March 31, 2022, the Company terminated its single derivative with a notional value totaling $200,000,000, resulting in a termination value of $9,316,000. During the three months ended March 31, 2022 and June 30, 2022, the Company reclassified $233,000 and $232,000, respectively, into earnings through interest expense in the consolidated statements of income. During the three months ended June 30, 2022, the Company terminated the hedged funding, incurring a termination fee of $732,000, which was recognized through interest expense in the consolidated statements of income, and reclassified the remaining $8,851,000 unrealized gain on the terminated derivative into earnings through other noninterest income in the consolidated statements of income. The following table presents the pre-tax impact of the terminated cash flow hedge on AOCI:
|  |  |  |  | Nine Months Ended
(Dollars in thousands) |  |  |  |  |  |  | September 30, 2022
Unrealized gains on terminated hedges |  |  |  |  |  |  |
Beginning Balance |  |  |  |  |  |  | $ | — |
Unrealized gains arising during the period |  |  |  |  |  |  | 9,316 |
Reclassification adjustments for amortization of unrealized (gains) into net income |  |  |  |  |  |  | (9,316) |
Ending Balance |  |  |  |  |  |  | $ | — |
The Company did not have any derivative financial instruments at September 30, 2023 and December 31, 2022. The table below presents the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income, net of tax:
|  | Amount of Gain or (Loss) Recognized in OCI on Derivative |  | Amount of Gain or (Loss) Recognized in OCI Included Component |  | Location of (Gain) or Loss Recognized from AOCI into Income |  | Amount of (Gain) or Loss Reclassified from AOCI into Income |  | Amount of (Gain) or Loss Reclassified from AOCI into Income Included Component
(Dollars in thousands) |  |  |  |  |
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |  |
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 2,398 |  |  | $ | 2,398 |  |  | Interest Expense |  | $ | 7,103 |  |  | $ | 7,103 |

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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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