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Derivatives and Hedging Activities | 6 Months Ended
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Jun. 30, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Activities | Note 15 — Derivatives and Hedging Activities Accounting Policy for Derivative Instruments and Hedging Activities FASB ASC 815, Derivatives and Hedging (“ASC 815”), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. Risk Management Objective of Using Derivatives The Company is exposed to certain risks 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 derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. Non-Designated Hedges Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of June 30, 2020. No such instruments were outstanding as of December 31, 2019.
|  | Derivative Assets |  | Derivative Liabilities
|  |  |  |  |  | As of June 30, 2020 |  |  | As of December 31, 2019 |  |  |  |  |  | As of June 30, 2020 |  |  | As of December 31, 2019
|  | Notional Amount |  |  | Balance Sheet Location |  | Fair Value |  |  | Balance Sheet Location |  | Fair Value |  | Notional Amount |  |  | Balance Sheet Location |  | Fair Value |  |  | Balance Sheet Location |  | Fair Value
|  | (in thousands)
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate products |  | $ | 29,492 |  |  | Other Assets |  | $ | 1,085 |  |  | Other Assets |  | N/A |  | $ | 29,492 |  |  | Other Liabilities |  | $ | 1,183 |  |  | Other Liabilities |  | N/A
Total derivatives not designated as hedging instruments |  |  |  |  |  |  |  | $ | 1,085 |  |  |  |  | N/A |  |  |  |  |  |  |  | $ | 1,183 |  |  |  |  | N/A
The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Income Statement as of June 30, 2020. No such instruments were outstanding as of December 31, 2019.
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 |
|  |  |  | Quarter Ended June 30, 2020 |
|  |  |  | (in thousands) |
Interest rate products |  | Other income |  | $ | (98 | )
Total |  |  |  | $ | (98 | )
Fee income recognized from the Company's derivative financial instruments for the three and six months ended June 30, 2020 was $512,000. The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of June 30, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Balance Sheet.
Offsetting of Derivative Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position |
|  | Gross Amounts of Recognized Assets |  |  | Gross Amounts Offset in the Statement of Financial Position |  |  | Net Amounts of Assets presented in the Statement of Financial Position |  |  | Financial Instruments |  |  | Cash Collateral Received |  |  | Net Amount |
|  | (in thousands) |
Derivatives |  | $ | 1,085 |  |  | $ | — |  |  | $ | 1,085 |  |  | $ | 1,085 |  |  | $ | — |  |  | $ | 1,085 |
Offsetting of Derivative Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position |
|  | Gross Amounts of Recognized Liabilities |  |  | Gross Amounts Offset in the Statement of Financial Position |  |  | Net Amounts of Liabilities presented in the Statement of Financial Position |  |  | Financial Instruments |  |  | Cash Collateral Provided |  |  | Net Amount |
|  | (in thousands) |
Derivatives |  | $ | 1,183 |  |  | $ | — |  |  | $ | 1,183 |  |  | $ | — |  |  | $ | 1,120 |  |  | $ | 63 |
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. In addition, these agreements may also require the Company to post additional collateral should it fail to maintain its status as a well- or adequately- capitalized institution. As of June 30, 2020, 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 $1.2 million. As of June 30, 2020, the Company had posted $1.1 million of collateral related to these agreements and is essentially over-collateralized since its net liability position is $98,000 ($1.1 million fair value of assets less $1.2 million fair value of liabilities) as of the end of the period. If the Company had breached any of these provisions at June 30, 2020, it could have been required to settle its obligations under the agreements at their termination value of $1.2 million.

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- References No definition available. + Details
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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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