v3.21.1

Derivatives, Hedging Activities and Balance Sheet Offsetting | 3 Months Ended
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Mar. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives, Hedging Activities and Balance Sheet Offsetting | Derivatives, Hedging Activities and Balance Sheet Offsetting The following table presents the total notional amounts and gross fair values of the Company’s derivatives as of the dates indicated. The derivative asset and liability balances are presented on a gross basis, prior to the application of master netting agreements, as included in other assets and other liabilities, respectively, on the consolidated balance sheets. The fair values of the Company's derivative instrument assets and liabilities are summarized as follows:
|  | As of March 31, 2021 |  | As of December 31, 2020
|  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
(in thousands) |  |  | Assets |  | Liabilities |  |  | Assets |  | Liabilities
Designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |
Fair value hedges |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 25,373 |  |  | $ | 547 |  |  | $ | 1,329 |  |  | $ | 25,559 |  |  | $ | 34 |  |  | $ | 2,452 |
Total |  | $ | 25,373 |  |  | $ | 547 |  |  | $ | 1,329 |  |  | $ | 25,559 |  |  | $ | 34 |  |  | $ | 2,452 |
Not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 346,944 |  |  | $ | 6,346 |  |  | $ | 6,361 |  |  | $ | 347,380 |  |  | $ | 10,758 |  |  | $ | 10,807 |
RPAs - protection sold |  | 4,412 |  |  | 1 |  |  | — |  |  | 4,471 |  |  | 4 |  |  | — |
RPAs - protection purchased |  | 9,778 |  |  | — |  |  | 4 |  |  | 9,825 |  |  | — |  |  | 8 |
Total |  | $ | 361,134 |  |  | $ | 6,347 |  |  | $ | 6,365 |  |  | $ | 361,676 |  |  | $ | 10,762 |  |  | $ | 10,815 |
Derivatives Designated as Hedging Instruments The Company uses derivative instruments to hedge its exposure to economic risks, including interest rate, liquidity, and credit risk. Certain hedging relationships are formally designated and qualify for hedge accounting under GAAP as fair value or cash flow hedges. Fair Value Hedges - Derivatives are designated as fair value hedges to limit the Company's exposure to changes in the fair value of assets or liabilities due to movements in interest rates. The Company entered into pay-fixed receive-floating interest rate swaps to manage its exposure to changes in fair value in certain fixed-rate assets. The gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income. Cash Flow Hedges - Derivatives are designated as cash flow hedges in order to minimize the variability in cash flows of earning assets or forecasted transactions caused by movement in interest rates. In February 2020, the Company entered into a pay-fixed receive-variable interest rate swap with a notional amount of $30.0 million to hedge against adverse fluctuations in interest rates by reducing exposure to variability in cash flows relating to interest payments on the Company's variable rate debt. The interest rate swap was designated as a cash flow hedge. The gain or loss on the derivative was recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. The Company terminated its cash flow hedge in the fourth quarter of 2020. The table below presents the effect of cash flow hedge accounting on AOCI for three months ended March 31, 2021 and 2020.
| Amount of Gain (Loss) Recognized in AOCI on Derivative |  | Location of Gain (Loss) Reclassified from AOCI into Income |  | Amount of Gain (Loss) Reclassified from AOCI into Income
| Three Months Ended March 31, |  |  |  | Three Months Ended March 31,
(in thousands) | 2021 |  | 2020 |  |  |  | 2021 |  | 2020
Interest rate swaps | $ | — |  |  | $ | (888) |  |  | Interest Expense |  | $ | — |  |  | $ | 5 |
The table below presents the effect of the Company’s derivative financial instruments designated as hedging instruments on the consolidated statements of income for the periods indicated:
| Location and Amount of Gain or Loss Recognized in Income on Fair Value and Cash Flow Hedging Relationships
| For the Three Months Ended March 31, |  |
| 2021 |  | 2020 |  |  |  |
(in thousands) | Interest Income |  | Other Income |  | Interest Income |  | Other Income |  |  |  |  |  |  |  |
Total amounts of income and expense line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded | $ | (108) |  |  | $ | — |  |  | $ | (47) |  |  | $ | — |  |  |  |  |  |  |  |  |
The effects of fair value and cash flow hedging: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedging relationships in subtopic 815-20: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged items | (1,633) |  |  | — |  |  | 1,750 |  |  | — |  |  |  |  |  |  |  |  |
Derivative designated as hedging instruments | 1,123 |  |  | — |  |  | (1,761) |  |  | — |  |  |  |  |  |  |  |  |
Income statement effect of cash flow hedging relationships in subtopic 815-20: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount reclassified from AOCI into income | — |  |  | — |  |  | 5 |  |  | — |  |  |  |  |  |  |  |  |
As of March 31, 2021, the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:
Line Item in the Balance Sheet in Which the Hedged Item is Included |  | Carrying Amount of the Hedged Assets |  | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset
(in thousands) |  |  |  |
Loans |  | $ | 26,173 |  |  | $ | 786 |
Derivatives Not Designated as Hedging Instruments Interest Rate Swaps - The Company has also entered into interest rate swap contracts. The derivative contracts related to transactions in which the Company enters into an interest rate swap with a customer, while simultaneously entering into an offsetting interest rate swap with an institutional counterparty. Credit Risk Participation Agreements - The Company enters into RPAs to manage the credit exposure on interest rate contracts associated with a syndicated loan. The Company may enter into protection purchased RPAs with institutional counterparties to decrease or increase its exposure to a borrower. Under the RPA, the Company will receive or make payment if a borrower defaults on the related interest rate contract. The Company manages its credit risk on RPAs by monitoring the creditworthiness of the borrowers and institutional counterparties, which is based on the normal credit review process. The notional amount of the RPAs reflects the Company’s pro-rata share of the derivative instrument. The following table presents the net gains (losses) recognized on the consolidated statements of income related to the derivatives not designated as hedging instruments for the periods indicated:
|  | Location in the Consolidated Statements of Income |  | For the Three Months Ended March 31, |  |
(in thousands) |  |  | 2021 |  | 2020 |  |  |  |
Interest rate swaps |  | Other income |  | $ | (34) |  |  | $ | 141 |  |  |  |  |
RPAs |  | Other income |  | — |  |  | 103 |  |  |  |  |
Total |  |  |  | $ | (34) |  |  | $ | 244 |  |  |  |  |
Offsetting of Derivatives The Company has entered into agreements with certain counterparty financial institutions, which include master netting agreements. However, the Company has elected to account for all derivatives with counterparty institutions on a gross basis. The Company manages the risk of default by its borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures. The table below presents gross derivatives and the respective collateral received or pledged in the form of other financial instruments as of March 31, 2021 and December 31, 2020, which are generally marketable securities and/or cash. The collateral amounts in the table below are limited to the outstanding balances of the related asset or liability (after netting is applied); thus instances of over-collateralization are not shown. Further, 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 consolidated balance sheets.
|  |  |  |  |  | Gross Amounts Not Offset in the Balance Sheet |  |
(in thousands) | Gross Amounts of Recognized Assets (Liabilities) |  | Gross Amounts Offset in the Balance Sheet |  | Net Amounts of Assets (Liabilities) presented in the Balance Sheet |  | Financial Instruments |  | Cash Collateral Received (Paid) |  | Net Assets (Liabilities)
As of March 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Asset Derivatives | $ | 6,894 |  |  | $ | — |  |  | $ | 6,894 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,894 |
Liability Derivatives | (7,694) |  |  | — |  |  | (7,694) |  |  | — |  |  | (2,140) |  |  | (5,554) |
As of December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Asset Derivatives | $ | 10,796 |  |  | $ | — |  |  | $ | 10,796 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,796 |
Liability Derivatives | (13,267) |  |  | — |  |  | (13,267) |  |  | — |  |  | (13,267) |  |  | — |
Credit-risk-related Contingent Features The Company has an unsecured federal funds line with its institutional derivative counterparty. The Company has an agreement with its institutional derivative counterparty that contains a provision under which if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has an agreement with its derivative counterparty that contains a provision under which the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. As of March 31, 2021, 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 $5.0 million. As of March 31, 2021, the Company had minimum collateral posting thresholds with certain of its derivative counterparties and has posted $2.1 million of collateral related to these agreements. If the Company had breached any of these provisions at March 31, 2021, it could have been required to settle its obligations under the agreements at their termination value of $5.0 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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