XML 28 R17.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Derivative Financial Instruments | 3 Months Ended
--- | ---
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Peoples 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 swaps 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 fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivative financial instruments is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows. Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions. Cash Flow Hedges of Interest Rate Risk Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At March 31, 2024, Peoples had entered into 11 interest rate swap contracts with an aggregate notional value of $105.0 million. Peoples will pay a fixed rate of interest for up to ten years while receiving a floating rate component of interest equal to term SOFR. The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs, which will continue to be rolled through the life of the interest rate swaps. At both March 31, 2024 and at December 31, 2023, the interest rate swaps were designated as cash flow hedges of $105.0 million, in brokered CDs, which are expected to be extended every 90 days through the maturity dates of the interest rate swaps. For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the brokered CDs are matched to the reset dates and payment dates on the receipt of the term SOFR rate (or the three-month LIBOR floating portion prior to June 30, 2023) of the swaps to ensure effectiveness of the cash flow hedge. During the three months ended March 31, 2024, and 2023, Peoples recorded reclassifications of losses to earnings of $0.9 million and $0.1 million, respectively. During the next twelve months, Peoples estimates that $1.4 million of AOCI will be reclassified as an addition to interest expense. The following table summarizes information about the interest rate swaps designated as cash flow hedges:
(Dollars in thousands) | March 31, 2024 | December 31, 2023
Notional amount | $ | 105,000 |  | $ | 105,000 |
Weighted average pay rates | 2.22 | % | 2.22 | %
Weighted average receive rates | 5.02 | % | 4.63 | %
Weighted average maturity | 1.7 years | 2.0 years
Pre-tax changes in fair value included in AOCI | $ | 3,689 |  | $ | 3,434 |
The following table presents changes in fair value recorded in AOCI and in the Consolidated Statements of Operations related to the cash flow hedges:
|  |  | Three Months Ended
|  |  | March 31,
(Dollars in thousands) |  |  |  | 2024 | 2023
Amount of losses (gains) recorded in AOCI, pre-tax |  |  |  | $ | (1,872) |  | $ | 1,356 |
The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:
| March 31, 2024 |  | December 31, 2023
(Dollars in thousands) | Notional Amount | Fair Value |  | Notional Amount | Fair Value
Included in "Other assets": |  |  |  |  |
Interest rate swaps related to debt | $ | 105,000 |  | $ | 3,574 |  |  | $ | 105,000 |  | $ | 3,314 |
Non-Designated Hedges Peoples maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this program, Peoples originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples Bank effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples Bank. Peoples Bank offsets its exposure in the interest rate swap by entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated hedges; therefore, each interest rate swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the three months ended March 31, 2024 and at or for the year ended December 31, 2023. The following table reflects the non-designated hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:
| March 31, 2024 |  | December 31, 2023
(Dollars in thousands) | Notional Amount | Fair Value |  | Notional Amount | Fair Value
Included in "Other assets": |  |  |  |  |
Interest rate swaps related to commercial loans | $ | 399,071 |  | $ | 21,575 |  |  | $ | 416,106 |  | $ | 18,990 |
Included in "Accrued expenses and other liabilities": |  |  |  |  |
Interest rate swaps related to commercial loans | $ | 399,071 |  | $ | 21,688 |  |  | $ | 416,106 |  | $ | 19,122 |
Pledged Collateral Peoples pledges or receives collateral for all interest rate swaps. When the fair value of Peoples' interest rate swaps is in a net liability position, Peoples must pledge collateral, and, when the fair value of Peoples' interest rate swaps is in a net asset position, the respective counterparties must pledge collateral. At March 31, 2024 and at December 31, 2023, Peoples had no cash pledged, while counterparties had $15.5 million of cash pledged at March 31, 2024 and $12.8 million of cash pledged at December 31, 2023. Peoples had no pledged investment securities at March 31, 2024 or at December 31, 2023, while the counterparties had pledged investment securities in the amounts of $2.1 million at March 31, 2024 and $2.2 million at December 31, 2023.

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