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Note 9 - Derivatives and Hedging Activities | 9 Months Ended
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Sep. 30, 2023
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. Fees paid to us by the correspondent banks are recognized as noninterest income on our Consolidated Statements of Income on the settlement date. The fair values of derivative instruments as of September 30, 2023, are reflected in the following table.
|  |  |  |  | Balance Sheet |  |  |  |
|  | Notional Amount |  | Location |  | Fair Value |
Derivative Assets |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 591,790,000 |  | Other Assets |  | $ | 35,060,000 |
Derivative Liabilities |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | 591,790,000 |  | Other Liabilities |  |  | 35,242,000 |
The effect of interest rate swaps that are not designated as hedging instruments resulted in income of $0.1 million during the first nine months of 2023 that was recorded in other noninterest expense on our Consolidated Statements of Income. The fair value of interest rate swaps in a liability position, which includes accrued interest, was $35.2 million as of September 30, 2023. We have master netting arrangements with our correspondent banks that allow us to net receivables and payables. The netting agreement also allows us to net related cash collateral received and transferred up to the fair value exposure amount. We have elected to not offset these transactions on the Consolidated Balance Sheets. As of September 30, 2023, the gross amount of derivative assets subject to master netting agreements presented on the Consolidated Balance Sheets was $34.7 million, while cash collateral reflecting cash requirements from our counterparties to us totaled $36.1 million, providing for an over-collateralized position on the Consolidated Balance Sheets of $1.4 million. As of September 30, 2023, the gross amount of derivative liabilities subject to master netting agreements presented on the Consolidated Balance Sheets was $0.3 million, while cash collateral reflecting cash requirements from us to our counterparties totaled $0.3 million, and the net amount of derivative liabilities not offset on the Consolidated Balance Sheets was less than $0.1 million. Cash collateral amounts, which are based on daily fair value calculations, are adjusted daily if fair value changes exceed an aggregate of $250,000. Interest rate swaps entered into with commercial loan customers had notional amounts aggregating $592 million as of September 30, 2023. Associated credit exposure is generally mitigated by securing the interest rates swaps with the underlying collateral of the loan instruments. The fair values of derivative instruments as of December 31, 2022, are reflected in the following table.
|  |  |  |  | Balance Sheet |  |  |  |
|  | Notional Amount |  | Location |  | Fair Value |
Derivative Assets |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 401,572,000 |  | Other Assets |  | $ | 25,697,000 |
Derivative Liabilities |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | 401,572,000 |  | Other Liabilities |  |  | 25,900,000 |
The effect of interest rate swaps that are not designated as hedging instruments resulted in income of less than $0.1 million during the year-ended December 31, 2022 that was recorded in other noninterest expense on our Consolidated Statements of Income. The fair value of interest rate swaps in a liability position, which includes accrued interest, was $25.9 million as of December 31, 2022. We have master netting arrangements with our correspondent banks that allow us to net receivables and payables. The netting agreement also allows us to net related cash collateral received and transferred up to the fair value exposure amount. We have elected to not offset these transactions on the Consolidated Balance Sheets. As of December 31, 2022, the gross amount of derivative assets subject to master netting agreements presented on the Consolidated Balance Sheets was $25.3 million, while cash collateral reflecting cash requirements from our counterparties to us totaled $25.2 million, and the net amount of derivative assets not offset in the Consolidated Balance Sheets was $0.1 million. As of December 31, 2022, the gross amount of derivative liabilities subject to master netting agreements presented on the Consolidated Balance Sheets was $0.4 million, while cash collateral reflecting cash requirements from us to our counterparties totaled $0.4 million, and the net amount of derivative liabilities not offset on the Consolidated Balance Sheets was $0. Cash collateral amounts, which are based on daily fair value calculations, are adjusted daily if fair value changes exceed an aggregate of $250,000. Interest rate swaps entered into with commercial loan customers had notional amounts aggregating $402 million as of December 31, 2022. Associated credit exposure is generally mitigated by securing the interest rates swaps with the underlying collateral of the loan instruments.

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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://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
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