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Derivatives, Hedging Activities, and Other Financial Instruments | 9 Months Ended
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Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives, Hedging Activities, and Other Financial Instruments | Derivatives, Hedging Activities and Other Financial Instruments The Company enters into derivative financial instruments which involve, to varying degrees, interest rate, market and credit risk. The Company manages these risks as part of its asset and liability management process and through credit policies and procedures, seeking to minimize counterparty credit risk by establishing credit limits and collateral agreements. The Company utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. In general, the derivative transactions entered into by the Company fall into one of two types: an economic hedge of a derivative offering to Bank customers, or a cash flow hedge related to counter the cash variability of a recognized financial asset or liability. The Company does not use derivative financial instruments for trading purposes. Customer Derivatives – Interest Rate Swaps The Company enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate loan into a fixed-rate loan. The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC Topic 820, Fair Value Measurements. The Company recognized gains of $15,000 and $364,000, respectively, in other income resulting from fair value adjustments for the three and nine months ended September 30, 2020 as compared to losses of $407,000 and $602,000, respectively, during the three and nine months ended September 30, 2019. The notional amount of derivatives not designated as hedging instruments was $711.4 million and $337.6 million at September 30, 2020 and December 31, 2019, respectively. The table below presents the fair value of derivatives not designated as hedging instruments as well as their location on the consolidated statements of financial condition (in thousands):
|  | Fair Value
Balance Sheet Location |  | September 30, 2020 |  | December 31, 2019
Other assets |  | $ | 55,516 |  |  | $ | 10,141 |
Other liabilities |  | 55,719 |  |  | 10,708 |
Credit Risk-Related Contingent Features The Company is a party to International Swaps and Derivatives Association agreements with third party broker-dealers that require a minimum dollar transfer amount upon a margin call. This requirement is dependent on certain specified credit measures. The amount of collateral posted with third parties was $57.5 million and $13.7 million at September 30, 2020 and December 31, 2019, respectively. The amount of collateral posted with third parties is deemed to be sufficient to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures. The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was $55.7 million and $10.7 million at September 30, 2020 and December 31, 2019, respectively.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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