XML 96 R20.htm IDEA: XBRL DOCUMENT
v3.19.3

DERIVATIVES | 9 Months Ended
--- | ---
Sep. 30, 2019
DERIVATIVES. |
DERIVATIVES | 12. DERIVATIVES As described in Note 16, Recent Accounting Pronouncements, during the first quarter of 2019 the Company adopted ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The Company has adopted the standard in 2019 with minimal impact to its financial position upon transition. The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Funding Rate ("SOFR") replace USD-LIBOR. ARRC has proposed that the transition to SOFR from USD-LIBOR will take place by the end of 2021. The Company has material contracts that are indexed to USD-LIBOR. Industry organizations are currently working on the transition plan. The Company is currently monitoring this activity and evaluating the risks involved. Cash Flow Hedges of Interest Rate Risk As part of its asset liability management, the Company utilizes interest rate swap agreements to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent the amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Interest rate swaps with notional amounts totaling $290.0 million and $240.0 million at September 30, 2019 and December 31, 2018, respectively, were designated as cash flow hedges of certain FHLB advances. The swaps were determined to be fully effective during the periods presented. The aggregate fair value of the swaps is recorded in other assets or other liabilities, with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining term of the swaps. The following table summarizes information about the interest rate swaps designated as cash flow hedges at September 30, 2019 and December 31, 2018:
(Dollars in thousands) |  | September 30, 2019 |  |  | December 31, 2018 |
Notional amounts |  | $ | 290,000 |  |  | $ | 240,000 |
Weighted average pay rates |  |  | 1.69 | % |  |  | 1.84 | %
Weighted average receive rates |  |  | 2.12 | % |  |  | 2.77 | %
Weighted average maturity |  |  | 3.16 | years |  |  | 2.03 | years
Interest income recorded on these swap transactions totaled $331 thousand and $1.4 million for the three and nine months ended September 30, 2019, and interest income recorded on these swap transactions totaled $374 thousand and $653 thousand for the three and nine months ended September 30, 2018 which is reported as a component of interest expense on FHLB advances. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income/expense as interest payments are made/received on the Company's variable-rate assets/liabilities. During the nine months ended September 30, 2019, the Company had $1.4 million of reclassifications as a reduction to interest expense. During the next twelve months, the Company estimates that $78 thousand will be reclassified as a decrease in interest expense. The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the consolidated statements of income relating to the cash flow derivative instruments for the three and nine months ended September 30, 2019 and 2018:
|  |  |  |  |  |  | Amount of gain |  | Amount of gain
|  |  |  |  |  |  |  |  | reclassified from |  |  | reclassified from
|  | Amount of (loss) gain |  | Amount of (loss) gain |  | Accumulated OCI |  | Accumulated OCI
(In thousands) |  | recognized in OCI |  | recognized in OCI |  | into income |  | into income
Interest rate contracts |  | included component |  | excluded component |  | included component |  | excluded component
Three months ended September 30, 2019 |  | $ | (657) |  | $ | — |  | $ | 331 |  | $ | —
Nine months ended September 30, 2019 |  | $ | (5,360) |  | $ | — |  | $ | 1,353 |  | $ | —
Three months ended September 30, 2018 |  | $ | 584 |  | $ | — |  | $ | 374 |  | $ | —
Nine months ended September 30, 2018 |  | $ | 4,431 |  | $ | — |  | $ | 653 |  | $ | —
The following table reflects the cash flow hedges included in the consolidated balance sheets at the dates indicated:
|  | September 30, 2019 |  | December 31, 2018
|  |  |  | Fair |  | Fair |  |  |  |  | Fair |  | Fair
(In thousands) |  | Notional |  | Value |  | Value |  | Notional |  | Value |  | Value
Included in other assets/(liabilities): |  | Amount |  | Asset |  | Liability |  | Amount |  | Asset |  | Liability
Interest rate swaps related to FHLB advances |  | $ | 240,000 |  | $ | 595 |  | $ | (1,439) |  | $ | 240,000 |  | $ | 4,239 |  | $ | (4)
Forward starting interest rate swaps related to FHLB advances |  |  | 50,000 |  |  | — |  |  | (1,818) |  |  | — |  |  | — |  |  | —
Non-Designated Hedges Derivatives not designated as hedges may be used to manage the Company's exposure to interest rate movements or to provide service to customers but do not meet the requirements for hedge accounting under U.S. GAAP. The Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Company executes with a third party in order to minimize the net risk exposure resulting from such transactions. These interest-rate swap agreements do not qualify for hedge accounting treatment, and therefore changes in fair value are reported in current period earnings. The following table presents summary information about the interest rate swaps at September 30, 2019 and December 31, 2018:
(Dollars in thousands) |  | September 30, 2019 |  |  | December 31, 2018 |
Notional amounts |  | $ | 465,764 |  |  | $ | 193,401 |
Weighted average pay rates |  |  | 4.06 | % |  |  | 4.52 | %
Weighted average receive rates |  |  | 4.06 | % |  |  | 4.52 | %
Weighted average maturity |  |  | 10.96 | years |  |  | 12.25 | years
Fair value of combined interest rate swaps |  | $ | — |  |  | $ | — |
Credit-Risk-Related Contingent Features As of September 30, 2019, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $21.4 million, while there were no derivatives in a net asset position. The Company has minimum collateral posting thresholds with certain of its derivative counterparties. If the termination value of derivatives is a net asset position, the counterparty is required to post collateral against its obligations to the Company under the agreements. However, if the termination value of derivatives is a net liability position, the Company is required to post collateral to the counterparty. At September 30, 2019, the Company posted collateral of $20.2 million to its counterparties under the agreements in a net liability position and received no collateral from its counterparties under the agreements in a net asset position. If the Company had breached any of these provisions at September 30, 2019, it could have been required to settle its obligations under the agreements at the 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration