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Note 9 - Derivatives and Hedging Activities | 3 Months Ended
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Mar. 31, 2022
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] |
9. | DERIVATIVES AND HEDGING ACTIVITIES
We are exposed to certain risks arising from both business operations and economic conditions. We principally manage the exposure to a wide variety of operational risks through core business activities. Economic risks, including interest rate, liquidity and credit risk, are primarily administered via the amount, sources and duration of assets and liabilities. Derivative financial instruments may also be used to assist in managing economic risks.
Derivatives not designated as hedges are not speculative and result from a service provided to certain commercial loan borrowers. We execute interest rate swaps with commercial banking customers desiring longer-term fixed rate loans, while simultaneously entering into interest rate swaps with correspondent banks to offset the impact of the interest rate swaps with the commercial banking customers. The net result is the desired floating rate loans and a minimization of the risk exposure of the interest rate swap transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the commercial banking customer interest rate swaps and the offsetting interest rate swaps with the correspondent banks are recognized directly to earnings. The fair values of derivative instruments as of March 31, 2022 are reflected in the following table.
|  | Notional Amount |  | Balance Sheet Location |  | Fair Value |
Derivative Assets |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 338,231,000 |  | Other Assets |  | $ | 10,053,000 |
Derivative Liabilities |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | 338,231,000 |  | Other Liabilities |  |  | 10,246,000 |
The effect of interest rate swaps that are not designated as hedging instruments resulted in noninterest income of less than $0.1 million during the first quarter of 2022. The fair value of interest rate swaps in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, was $10.2 million as of March 31, 2022. Cash collateral totaling $10.3 million was provided by the counterparty correspondent banks as of March 31, 2022. Interest rate swaps entered into with commercial loan customers had notional amounts aggregating $338 million as of March 31, 2022. Associated credit exposure is generally mitigated by securing the interest rates swaps with the underlying collateral of the loan instrument that has been hedged. The fair values of derivative instruments as of December 31, 2021 are reflected in the following table.
|  | Notional Amount |  | Balance Sheet Location |  | Fair Value |
Derivative Assets |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 279,419,000 |  | Other Assets |  | $ | 4,609,000 |
Derivative Liabilities |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | 279,419,000 |  | Other Liabilities |  |  | 4,857,000 |
The effect of interest rate swaps that are not designated as hedging instruments resulted in noninterest expense of $0.2 million during the year-ended December 31, 2021. The fair value of interest rate swaps in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, was $4.9 million as of December 31, 2021. Cash collateral totaling $3.6 million was provided to the counterparty correspondent banks as of December 31, 2021. Interest rate swaps entered into with commercial loan customers had notional amounts aggregating $279 million as of December 31, 2021. Associated credit exposure is generally mitigated by securing the interest rates swaps with the underlying collateral of the loan instrument that has been hedged.

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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 https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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