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Note 4 - Derivatives

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 4. Derivatives

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent amounts 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. The Company entered into nine forward starting pay fixed-rate interest rate swaps, with a total notional amount of $400 million, eight of which have since commenced. These are designated as cash flow hedges of current, or future, Federal Home Loan Bank advances. We are required to pay fixed rates of interest ranging from 0.631% to 1.23% and receive variable rates of interest that reset quarterly based on the daily compounding secured overnight financing rate (“SOFR”). Payment dates on the one remaining forward starting swap will commence in August 2022, with expiration dates on the nine positions ranging from December 2025 to March 2028. The swaps are determined to be fully effective during the period presented and therefore no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swap is recorded in other assets (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. 

            Interest expense recorded on these swap transactions totaled approximately $0.1 million and $0.7 million during the three and six months ended June 30, 2022, respectively, compared to $0.6 million and $1.2 million during the three and six months ended June 30, 2021, respectively, and is reported as a component of interest expense on FHLB Advances.

Cash Flow Hedge

The following table presents the net losses recorded in other comprehensive income and the Consolidated Statements of Income relating to the cash flow derivative instruments for the following periods:

		Three Months Ended June 30, 2022
		Amount of gain (loss) recognized in OCI (Effective Portion)				Amount of (gain) loss reclassified from OCI to interest income				Amount of gain recognized in other Noninterest income (Ineffective Portion)
		(dollars in thousands)
Interest rate contracts		$	8,284			$	129			$	-

		Three Months Ended June 30, 2021
		Amount of gain (loss) recognized in OCI (Effective Portion)				Amount of gain (loss) reclassified from OCI to interest income				Amount of gain recognized in other Noninterest income (Ineffective Portion)
		(dollars in thousands)
Interest rate contracts		$	(42	)		$	584			$	-

		Six Months Ended June 30, 2022
		Amount of gain (loss) recognized in OCI (Effective Portion)				Amount of (gain) loss reclassified from OCI to interest income				Amount of gain recognized in other Noninterest income (Ineffective Portion)
		(dollars in thousands)
Interest rate contracts		$	27,284			$	654			$	-

		Six Months Ended June 30, 2021
		Amount of gain (loss) recognized in OCI (Effective Portion)				Amount of gain (loss) reclassified from OCI to interest income				Amount of gain recognized in other Noninterest income (Ineffective Portion)
		(dollars in thousands)
Interest rate contracts		$	(18	)		$	1,215			$	-

The following table reflects the cash flow hedges included in the consolidated statements of condition as of June 30, 2022 and December 31, 2021:

		June 30, 2022								December 31, 2021
		Notional Amount				Fair Value				Notional Amount				Fair Value
						(dollars in thousands)
Interest rate swaps related to FHLB advances included in assets		$	400,000			$	31,285			$	475,000			$	3,347

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 https://asc.fasb.org/topic&trid=2229140

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 50
-Paragraph 5
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008

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- References

No definition available.

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