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Derivatives and Hedging Activities | 6 Months Ended
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Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Activities | Derivatives and Hedging Activities Risk Management Objective of Using Derivatives 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 existing credit derivatives result from participations of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. Fair Value Hedges of Interest Rate Risk The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income. As of June 30, 2023, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges. As of December 31, 2022, there no balances for Fixed Rate Loans.
Line Item in the Statement of Financial Position in Which the Hedged Item is Included | Carrying Amount of the Hedged Assets/(Liabilities) | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
| June 30, 2023 | June 30, 2023
Fixed Rate Loans 1 | $146,680 | $(3,320)
Total | $146,680 | $(3,320)
1 These amounts include the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At June 30, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $795.6 million; the cumulative basis adjustments associated with these hedging relationships was $3.3 million; and the amounts of the designated hedged items were $150 million.
Non-designated Hedges The Company’s existing credit derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans. Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Statements of Condition The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated statements of condition as of June 30, 2023 and December 31, 2022. The Company began entering into derivative transactions in the second quarter of 2022. Amounts below are presented on a net basis in accordance with applicable accounting guidance.
Derivative Assets |  |  |
| June 30, 2023
| Notional | Balance Sheet | Fair
(In thousands) | Amount | Location | Value*
Derivatives designated as hedging instruments |  |  |
Interest Rate Products | $ | 150,000 |  | Other Assets | $ | 3,420 |
Total derivatives designated as hedging instruments |  |  | $ | 3,420 |
*The Fair Value reported for June 30, 2023 includes $121,000 of accrued interest receivable.
Derivative Assets |  |  |
| December 31, 2022
| Notional | Balance Sheet | Fair
(In thousands) | Amount | Location | Value
Derivatives designated as hedging instruments |  |  |
Interest Rate Products | $ | 0 |  | Other Assets | $ | 0 |
Total derivatives designated as hedging instruments |  |  | $ | 0 |
Derivative Liabilities |
| June 30, 2023
| Notional | Balance Sheet | Fair
(In thousands) | Amount | Location | Value
Derivatives not designated as hedging instruments
Risk Participation Agreement | $ | 7,499 |  | Other Liabilities | $ | 18 |
Total derivatives not designated as hedging instruments | $ | 18 |
Derivative Liabilities |  |  |
| December 31, 2022
| Notional | Balance Sheet | Fair
(In thousands) | Amount | Location | Value
Derivatives not designated as hedging instruments
Risk Participation Agreement | $ | 7,499 |  | Other Liabilities | $ | 21 |
Total derivatives not designated as hedging instruments |  | $ | 21 |
Tabular Disclosure of the Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Income The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of income as of June 30, 2023:
The Effect of Fair Value and Cash Flow Hedge Accounting on the Statement of Financial Performance
| Location of Gain or (Loss) Recognized in Income on Derivative
| Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022
(In thousands) | Interest Income
Total amounts of income and expense line items presented in the statement of financial performance in which the effects of fair value or cash flow hedges are recorded | $ | 305 |  | $ | 0 |
The effects of fair value and cash flow hedging: |  |
Gain or (loss) on fair value hedging relationships in Subtopic 815-20 |  |
Interest contracts |  |
Hedged items | (3,320) |  | 0 |
Derivatives designated as hedging instruments | 3,625 |  | 0 |
The Effect of Fair Value and Cash Flow Hedge Accounting on the Statement of Financial Performance
| Location of Gain or (Loss) Recognized in Income on Derivative
| Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022
(In thousands) | Interest Income
Total amounts of income and expense line items presented in the statement of financial performance in which the effects of fair value or cash flow hedges are recorded | $ | 305 |  | $ | 0 |
The effects of fair value and cash flow hedging: |  |
Gain or (loss) on fair value hedging relationships in Subtopic 815-20 |  |
Interest contracts |  |
Hedged items | (3,320) |  | 0 |
Derivatives designated as hedging instruments | 3,625 |  | 0 |
Tabular Disclosure of the Effect of Derivatives Not Designated as Hedging Instruments on the Income Statement The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the consolidated statements of income for the three and six months ended June 30, 2023:
Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20 | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative
|  | Three Months Ended
(In thousands) |  | June 30, 2023 | June 30, 2022
Risk Participation Agreement | Other income / (expense) | $ | 8 |  | $ | 41 |
Total |  | $ | 8 |  | $ | 41 |
Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Financial Performance
Derivatives Not Designated as Hedging Instruments under Subtopic 815-20 | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative
|  | Six Months Ended
(In thousands) |  | June 30, 2023 | June 30, 2022
Risk Participation Agreement | Other income / (expense) | $ | 2 |  | $ | 41 |
Total |  | $ | 2 |  | $ | 41 |
Credit-risk-related Contingent Features Applicable for OTC derivatives with dealers The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the company could also be declared in default on its derivative obligations. As of June 30, 2023, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $0. As of June 30, 2023, the Company has not posted any collateral related to these agreements. The interest rate hedge counterparty has posted $3.5 million of collateral in proportion to potential losses in the derivative position.

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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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