XML 26 R15.htm IDEA: XBRL DOCUMENT
v3.24.3

DERIVATIVES | 9 Months Ended
--- | ---
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | 7. DERIVATIVES The Company utilizes various designated and undesignated derivative financial instruments to reduce its exposure to movements in interest rates. The Company measures all derivatives at fair value on its consolidated balance sheet. In each reporting period, the Company records the derivative instruments in other assets or other liabilities depending on whether the derivatives are in an asset or liability position. For derivative instruments that are designated as cash flow hedging instruments, the Company records the effective portion of the changes in the fair value of the derivative in accumulated other comprehensive income (loss) ("AOCI"), net of tax, until earnings are affected by the variability of cash flows of the hedged transaction. The Company immediately recognizes the portion of the gain or loss in the fair value of the derivative that represents hedge ineffectiveness in current period earnings. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivative are included in current period earnings. Derivative financial instruments are subject to credit and counterparty risk, which is defined as the risk of financial loss if a borrower or counterparty is either unable or unwilling to repay borrowings or settle transactions in accordance with the underlying contractual terms. Credit and counterparty risks associated with derivative financial instruments are similar to those relating to traditional financial instruments. The Company manages derivative credit and counterparty risk by evaluating the creditworthiness of each borrower or counterparty and requiring collateral where appropriate. Interest Rate Lock and Forward Sale Commitments The Company enters into interest rate lock commitments on certain mortgage loans that are intended to be sold. To manage interest rate risk on interest rate lock commitments, the Company also enters into forward loan sale commitments on the loans that are intended to be sold. The interest rate lock and forward loan sale commitments are accounted for as undesignated derivatives and are recorded at their respective fair values in other assets and other liabilities, with changes in fair value recorded in current period earnings. These instruments serve to reduce the Company's exposure to movements in interest rates. The Company was party to interest rate lock commitments on $1.6 million and $1.8 million of mortgage loans at September 30, 2024 and December 31, 2023, respectively. The Company was not a party to any forward sale commitments on mortgage loans at September 30, 2024 and December 31, 2023. Risk Participation Agreements The Company enters into credit risk participation agreements ("RPA") with financial institution counterparties for interest rate swaps related to loans in which it participates. The RPAs entered into by us and a participant bank provide credit protection to the financial institution counterparties should the borrowers fail to perform on their interest rate derivative contracts with the financial institutions. The RPAs are accounted for as undesignated derivatives and are recorded at fair value, with changes in fair value recorded in current period earnings. The Company was party to RPAs with total notional amounts of $35.4 million and $36.0 million at September 30, 2024 and December 31, 2023, respectively. The fair value of the RPAs was insignificant to the consolidated financial statements at September 30, 2024 and December 31, 2023. Back-to-Back Swap Agreements The Company established a program whereby it originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an equal and offsetting swap with a highly rated third-party financial institution. These "back-to-back swap agreements" are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. These back-to-back swap agreements are free-standing derivatives and recorded at fair value on our consolidated balance sheet in other assets or other liabilities. The Company was party to swap agreements with its borrowers with total notional amounts of $50.4 million and $51.1 million at September 30, 2024 and December 31, 2023, respectively, offset by swap agreements with third party financial institutions with the same total notional amounts. The Company received $9.0 million and $9.6 million in counter-party cash collateral related to the back-to-back swap agreements at September 30, 2024 and December 31, 2023, respectively. Interest Rate Swap During the first quarter of 2022, the Company entered into a forward starting interest rate swap, with an effective date of March 31, 2024. This transaction had a notional amount of $115.5 million and was designated as a fair value hedge of certain municipal debt securities. The Company pays the counterparty a fixed rate of 2.095% and receives a floating rate based on the Federal Funds effective rate. The fair value hedge has a maturity date of March 31, 2029. The interest rate swap is carried on the Company’s consolidated balance sheet at its fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The changes in the fair value of the interest rate swap are recorded in interest income. The unrealized gains or losses due to changes in fair value of the hedged debt securities due to changes in benchmark interest rates are recorded as an adjustment to the hedged debt securities and offset in the same interest income line item. At September 30, 2024, the hedge was determined to be effective and the Company expects the hedge to remain effective during the remaining term. During the three and nine months ended September 30, 2024, the Company recorded income from the interest rate swap of $1.1 million and $1.9 million, respectively. The following tables present the location of all assets and liabilities associated with our derivative instruments within the consolidated balance sheets as of the dates presented:
Derivative Financial Instruments Not Designated as Hedging Instruments |  | Asset Derivatives |  | Liability Derivatives
| Fair Value at |  | Fair Value at
(dollars in thousands) |  | Balance Sheet Location |  | September 30, 2024 |  | December 31, 2023 |  | September 30, 2024 |  | December 31, 2023
Interest rate lock and forward sale commitments |  | Other assets / other liabilities |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | 34 |
Back-to-back swap agreements |  | Other assets / other liabilities |  | 2,875 |  |  | 3,547 |  |  | 2,875 |  |  | 3,547 |
Derivative Financial Instruments Designated as Hedging Instruments |  | Asset Derivatives |  | Liability Derivatives
| Fair Value at |  | Fair Value at
(dollars in thousands) |  | Balance Sheet Location |  | September 30, 2024 |  | December 31, 2023 |  | September 30, 2024 |  | December 31, 2023
Interest rate swap |  | Other assets / other liabilities |  | $ | 5,202 |  |  | $ | 6,440 |  |  | $ | — |  |  | $ | — |
The following tables present the impact of derivative instruments and their location within the consolidated statements of income for the periods presented:
Derivative Financial Instruments Not Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized in Earnings on Derivatives |  | Amount of Gain (Loss) Recognized in Earnings on Derivatives
(dollars in thousands) |  |
Three Months Ended September 30, 2024 |  |  |  |
Interest rate lock and forward sale commitments |  | Mortgage banking income |  | $ | 1 |
Loans held for sale |  | Other income |  | 17 |
Three Months Ended September 30, 2023 |  |  |  |
Interest rate lock and forward sale commitments |  | Mortgage banking income |  | (16) |
Loans held for sale |  | Other income |  | 4 |
Back-to-back swap agreements |  | Other service charges and fees |  | 36 |
Derivative Financial Instruments Not Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized in Earnings on Derivatives |  | Amount of Gain (Loss) Recognized in Earnings on Derivatives
(dollars in thousands) |  |
Nine Months Ended September 30, 2024 |  |  |  |
Interest rate lock and forward sale commitments |  | Mortgage banking income |  | $ | 32 |
Back-to-back swap agreements |  | Other service charges and fees |  | 80 |
Nine Months Ended September 30, 2023 |  |  |  |
Interest rate lock and forward sale commitments |  | Mortgage banking income |  | (8) |
Loans held for sale |  | Other income |  | 3 |
Back-to-back swap agreements |  | Other service charges and fees |  | 71 |
Derivative Financial Instruments Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized in Earnings on Derivatives |  | Amount of Gain (Loss) Recognized in Earnings on Derivatives
(dollars in thousands) |  |
Three Months Ended September 30, 2024 |  |  |  |
Interest rate swap |  | Interest income |  | $ | 1,148 |
Three Months Ended September 30, 2023 |  |  |  |
Interest rate swap |  | Interest income |  | (121) |
Derivative Financial Instruments Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized in Earnings on Derivatives |  | Amount of Gain (Loss) Recognized in Earnings on Derivatives
(dollars in thousands) |  |
Nine Months Ended September 30, 2024 |  |  |  |
Interest rate swap |  | Interest income |  | $ | 1,924 |
Nine Months Ended September 30, 2023 |  |  |  |
Interest rate swap |  | Interest income |  | (180) |
The following table presents the amounts recorded on the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of the periods presented:
Line Item in the Consolidated Balance Sheets |  |  |  |
(dollars in thousands) |  | September 30, 2024 |  | December 31, 2023
Investment securities, available-for-sale: |  |  |  |
Carrying Amount of the Hedged Assets |  | $ | 93,635 |  |  | $ | 90,636 |
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets |  | (5,531) |  |  | (6,817) |

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