XML 34 R22.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Derivatives and Hedging Activities | 3 Months Ended
--- | ---
Mar. 31, 2024
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 also enters into interest rate derivatives to accommodate the business requirements of certain qualifying customers. All derivatives are recognized as other assets or other liabilities on the Company's Consolidated Statements of Condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation. Derivatives Designated as Hedging Instruments 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. As of March 31, 2024, the Company had interest rate swaps with a total notional amount of $150.0 million hedging fixed-rate residential mortgage loans. 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 March 31, 2024 and December 31, 2023, the following amounts were recorded on the consolidated statements of condition related to cumulative basis adjustment for fair value hedges.
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) | Carrying Amount of the Hedged Assets/(Liabilities) | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
| March 31, 2024 | March 31, 2024 | December 31, 2023 | December 31, 2023
Fixed Rate Loans 1 | $147,467 | $(2,533) | $148,633 | $(1,367)
Total | $147,467 | $(2,533) | $148,633 | $(1,367)
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 March 31, 2024 and December 31, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $753.0 million and $763.4 million respectively; the cumulative basis adjustments associated with these hedging relationships was $2.5 million and $1.4 million, respectively; and the amounts of the designated hedged items were $150.0 million for both periods.
Derivatives Not Designated as Hedging Instruments The Company enters into interest rate swaps to help commercial loan borrowers manage their interest rate risk. These interest rate swap contracts allow borrowers to convert variable-rate loan payments to fixed-rate loan payments. When the Company enters into an interest rate derivative contract with a commercial loan borrower, it simultaneously enters into a “mirror” interest rate contract with a third party. For interest rate swaps, the third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments. The Company's credit policies with respect to interest rate contracts with commercial borrowers are similar to those used for loans. The Company retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans. The interest rate contracts with counterparties are generally subject to bilateral collateralization terms. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings. The Company has entered into risk participation agreements with other banks in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank. 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 March 31, 2024 and December 31, 2023. The Company began entering into derivative transactions in the second quarter of 2022.
Derivative Assets |  |  |
| March 31, 2024
(In thousands) | Notional Amount | Balance Sheet Location | Fair Value*
Derivatives designated as hedging instruments |  |  |
Interest Rate Products | $ | 150,000 |  | Other Assets | $ | 2,653 |
Total derivatives designated as hedging instruments |  |  | $ | 2,653 |
Derivatives not designated as hedging instruments |  |  |
Interest Rate Products | $ | 52,545 |  | Other Assets | $ | 887 |
Risk Participation Agreement | 0 |  | Other Assets | 0 |
Total derivatives not designated as hedging instruments |  |  | $ | 887 |
Derivative Assets |  |  |
| December 31, 2023
(In thousands) | Notional Amount | Balance Sheet Location | Fair Value
Derivatives designated as hedging instruments |  |  |
Interest Rate Products | $ | 150,000 |  | Other Assets | $ | 1,503 |
Total derivatives designated as hedging instruments |  |  | $ | 1,503 |
Derivatives not designated as hedging instruments |  |  |
Interest Rate Products | $ | 34,930 |  | Other Assets | $ | 1,610 |
Risk Participation Agreement | 0 |  | Other Assets | 0 |
Total derivatives not designated as hedging instruments |  |  | $ | 1,610 |
Derivative Liabilities |
| March 31, 2024
(In thousands) | Notional Amount | Balance Sheet Location | Fair Value*
Derivatives not designated as hedging instruments |
Interest Rate Products | $ | 52,545 |  | Other Liabilities | $ | 1,019 |
Risk Participation Agreement | 17,302 |  | Other Liabilities | 25 |
Total derivatives not designated as hedging instruments | $ | 1,044 |
| December 31, 2023
(In thousands) | Notional Amount | Balance Sheet Location | Fair Value
Derivatives not designated as hedging instruments |  |  |
Interest Rate Products | $ | 34,930 |  | Other Liabilities | $ | 1,778 |
Risk Participation Agreement | 7,542 |  | Other Liabilities | 48 |
Total derivatives not designated as hedging instruments |  |  | $ | 1,826 |
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 for the three months ended March 31, 2024 and 2023:
The Effect of Fair Value and Cash Flow Hedge Accounting on the Statement of Consolidated Income
| Location of Gain or (Loss) Recognized in Income on Derivative
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023
(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 | $ | 664 |  | $ | 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 | (1,165) |  | 0 |
Derivatives designated as hedging instruments | 1,829 |  | 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 months ending March 31, 2024 and March 31, 2023:
Effect of Derivatives Not Designated as Hedging Instruments on the Statement of Consolidated Income
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) |  | March 31, 2024 | March 31, 2023
Interest Rate Products | Other Income | $ | 36 |  | $ | 0 |
Risk Participation Agreement | Other Income | 72 |  | (6) |
Total |  | $ | 108 |  | $ | (6) |
Fee Income | Other income | $ | 239 |  | $ | 0 |
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 March 31, 2024 and December 31, 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 $1.1 million and $1.8 million, respectively. As of March 31, 2024 and December 31, 2023, the Company has posted $851,444 and $1.5 million, respectively, in collateral related to these agreements. The interest rate hedge counterparty has posted $2.4 million and $1.5 million of collateral in proportion to potential losses in the derivative position at March 31, 2024 and December 31, 2023, respectively.

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