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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended
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Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | ​ ​ NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES ​ The Company uses derivative instruments to minimize fluctuations in earnings and cash flows caused by interest rate volatility. The Company’s interest rate risk management strategy involves modifying the re-pricing characteristics of certain assets or liabilities so the changes in interest rates do not have a significant effect on net interest income. Thus, all of the Company's derivative contracts are considered to be interest rate contracts. ​ The Company recognizes its derivative instruments on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). The Company formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items. Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income or loss. ​ The Company offers derivative products in the form of interest rate swaps, to commercial loan customers to facilitate their risk management strategies. These instruments are executed through Master Netting Arrangements ("MNA") with financial institution counterparties or Risk Participation Agreements ("RPA") with commercial bank counterparties, for which the Company assumes a pro rata share of the credit exposure associated with a borrower's performance related to the derivative contract with the counterparty. ​ The following tables present information about derivative assets and liabilities at September 30, 2020 and December 31, 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2020
​ | ​ | ​ | ​ | Weighted | ​ | ​ |  | ​
​ | ​ | Notional | ​ | Average | ​ | Fair Value | ​ | Location Fair
​ | ​ | Amount | ​ | Maturity | ​ | Asset (Liability) |  | Value Asset
​ |  | (in thousands) |  | (in years) |  | (in thousands) |  | (Liability)
Cash flow hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swap on wholesale fundings | ​ | $ | 125,000 |  | ​ | 4.1 | ​ | $ | (6,835) | ​ | Other liabilities
Total cash flow hedges | ​ |  | 125,000 |  | ​ | 4.1 | ​ | ​ | (6,835) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swap on securities | ​ |  | 37,190 |  | ​ | 8.7 | ​ |  | 3,445 | ​ | Other assets
Total fair value hedges | ​ |  | 37,190 |  | ​ | 8.7 | ​ | ​ | 3,445 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Economic hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Forward sale commitments | ​ |  | 47,739 |  | ​ | 0.2 | ​ |  | (87) | ​ | Other liabilities
Customer Loan Swaps-MNA Counterparty | ​ | ​ | 189,244 | ​ | ​ | 7.1 | ​ | ​ | (16,965) | ​ | Other liabilities
Customer Loan Swaps-RPA Counterparty | ​ | ​ | 103,391 | ​ | ​ | 7.8 | ​ | ​ | (11,071) | ​ | Other liabilities
Customer Loan Swaps-Customer | ​ | ​ | 292,635 | ​ | ​ | 7.4 | ​ | ​ | 28,036 | ​ | Other assets
Total economic hedges | ​ |  | 633,009 |  | ​ | ​ | ​ | ​ | (87) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-hedging derivatives: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate lock commitments | ​ |  | 27,730 |  | ​ | 0.1 | ​ |  | 24 | ​ | Other assets
Total non-hedging derivatives | ​ |  | 27,730 |  | ​ | 0.1 | ​ | ​ | 24 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total | ​ | $ | 822,929 | ​ | ​ | ​ | ​ | $ | (3,453) | ​ | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2019
​ | ​ | ​ | ​ | Weighted | ​ | ​ |  | ​
​ | ​ | Notional | ​ | Average | ​ | Fair Value | ​ | Location Fair
​ | ​ | Amount | ​ | Maturity | ​ | Asset (Liability) |  | Value Asset
​ |  | (in thousands) |  | (in years) |  | (in thousands) |  | (Liability)
Cash flow hedges: |  | ​ |  |  | ​ |  |  | ​ |  | ​ | ​
Interest rate swap on wholesale fundings | ​ | $ | 100,000 |  | ​ | 4.6 | ​ | $ | (1,311) | ​ | Other liabilities
Total cash flow hedges | ​ |  | 100,000 |  | ​ | ​ | ​ |  | (1,311) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swap on securities | ​ |  | 37,190 |  | ​ | 9.6 | ​ |  | 593 | ​ | Other liabilities
Total fair value hedges | ​ |  | 37,190 |  | ​ | ​ | ​ | ​ | 593 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Economic hedges: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Forward sale commitments | ​ | ​ | 11,228 |  | ​ | 0.1 | ​ |  | (84) | ​ | Other liabilities
Customer Loan Swaps-MNA Counterparty | ​ | ​ | 135,598 |  | ​ | 7.5 | ​ |  | (4,669) | ​ | (1)
Customer Loan Swaps-RPA Counterparty | ​ | ​ | 69,505 |  | ​ | 8.8 | ​ |  | (3,377) | ​ | (1)
Customer Loan Swaps-Customer | ​ | ​ | 205,103 |  | ​ | 8.1 | ​ |  | 8,046 | ​ | (1)
Total economic hedges | ​ |  | 421,434 |  | ​ | ​ | ​ | ​ | (84) | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-hedging derivatives: | ​ |  |  |  | ​ |  | ​ |  |  | ​ | ​
Interest rate lock commitments | ​ |  | 21,748 |  | ​ | 0.1 | ​ |  | 59 | ​ | Other assets
Total non-hedging derivatives | ​ |  | 21,748 |  | ​ | ​ | ​ |  | 59 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total | ​ | $ | 580,372 | ​ | ​ | ​ | ​ | $ | (743) | ​ | ​
(1) | Customer loan derivatives are subject to MNA or RPA arrangements with financial institution counterparties, thus assets and liabilities with the counterparty were previously netted for financial statement presentation.
​ As of September 30, 2020 and December 31, 2019, the following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | ​ | ​ |  | Cumulative Amount of Fair
​ | ​ | Location of Hedged Item on | ​ | Carrying Amount of Hedged | ​ | Value Hedging Adjustment in
​ |  | Balance Sheet |  | Assets (Liabilities) |  | Carrying Amount
September 30, 2020 |  |  |  | ​ |  |  | ​ |
Fair value hedges: |  |  |  | ​ |  |  | ​ |
Interest rate swap on securities |  | Securities Available for Sale | ​ | $ | 42,564 | ​ | $ | 5,374
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
December 31, 2019 |  |  | ​ |  |  | ​ |  |
Fair value hedges: |  |  | ​ |  |  | ​ |  |
Interest rate swap on securities |  | Securities Available for Sale | ​ | $ | 39,026 | ​ | $ | 523
​ Information about derivative assets and liabilities for September 30, 2020 and December 31, 2019, follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30, 2020
​ |  | Amount of |  | ​ |  | Amount of |  | ​ |  | ​
​ | ​ | Gain (Loss) | ​ | ​ | ​ | Gain (Loss) | ​ | ​ | ​ | ​
​ | ​ | Recognized in | ​ | ​ | ​ | Reclassified | ​ | Location of | ​ | Amount of
​ | ​ | Other | ​ | Location of Gain (Loss) | ​ | from Other | ​ | Gain (Loss) | ​ | Gain (Loss)
​ | ​ | Comprehensive | ​ | Reclassified from Other | ​ | Comprehensive | ​ | Recognized in | ​ | Recognized
(in thousands) |  | Income |  | Comprehensive Income |  | Income |  | Income |  | in Income
Cash flow hedges: |  | ​ |  |  |  |  | ​ |  |  |  |  | ​ |
Interest rate swap on wholesale funding | ​ | $ | (5,231) | ​ | Interest expense | ​ | $ | — |  | Interest expense | ​ | $ | (642)
Total cash flow hedges | ​ |  | (5,231) |  | ​ | ​ |  | — |  |  | ​ |  | (642)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value hedges: | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |
Interest rate swap on securities | ​ |  | 4,113 |  | Interest income | ​ |  | — |  | Interest income | ​ |  | (145)
Total fair value hedges | ​ |  | 4,113 |  | ​ | ​ |  | — |  |  | ​ |  | (145)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Economic hedges: | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |
Forward commitments | ​ |  | — |  | Other income | ​ |  | — |  | Other income | ​ |  | (3)
Total economic hedges | ​ |  | — |  | ​ | ​ |  | — |  |  | ​ |  | (3)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-hedging derivatives: | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |
Interest rate lock commitments | ​ |  | — |  | Other income | ​ |  | — |  | Other income | ​ |  | (35)
Total non-hedging derivatives | ​ |  | — |  | ​ | ​ |  | — |  |  | ​ |  | (35)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total | ​ | $ | (1,118) | ​ | ​ | ​ | $ | — |  |  | ​ | $ | (825)
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Years Ended December 31, 2019
​ |  | Amount of |  | ​ |  | Amount of |  | ​ |  | ​
​ | ​ | Gain (Loss) | ​ | ​ | ​ | Gain (Loss) | ​ | ​ | ​ | Amount of
​ | ​ | Recognized in | ​ | ​ | ​ | Reclassified | ​ | Location of | ​ | Gain (Loss)
​ | ​ | Other | ​ | Location of Gain (Loss) | ​ | from Other | ​ | Gain (Loss) | ​ | Recognized
​ | ​ | Comprehensive | ​ | Reclassified from Other | ​ | Comprehensive | ​ | Recognized in | ​ | Recognized
(in thousands) | ​ | Income | ​ | Comprehensive Income | ​ | Income | ​ | Income | ​ | in Income
Cash flow hedges: |  | ​ |  |  |  | ​ |  |  |  |  |  | ​ |
Interest rate swap on wholesale funding | ​ | $ | — |  | Acquisition, restructuring, and other expenses | ​ | $ | 3,156 |  | Interest expense | ​ | $ | (603)
Interest rate cap agreements | ​ | ​ | 2,291 | ​ | Interest expense | ​ | ​ | — | ​ | Interest expense | ​ | ​ | (2)
Total cash flow hedges | ​ | ​ | 2,291 | ​ | ​ | ​ |  | 3,156 |  | ​ | ​ |  | (605)
​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value hedges: | ​ | ​ |  |  |  | ​ |  |  |  |  | ​ |  |
Interest rate swap on securities | ​ |  | (523) |  | Interest income | ​ |  | — |  | Interest expense | ​ |  | 7
Total economic hedges | ​ | ​ | (523) | ​ | ​ | ​ |  | — |  |  | ​ |  | 7
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Economic hedges: | ​ | ​ |  |  |  | ​ |  |  |  |  | ​ |  |
Forward commitments | ​ |  | — |  | Other income | ​ |  | — |  | Other income | ​ |  | (84)
Total economic hedges | ​ | ​ | — | ​ | ​ | ​ |  | — |  |  | ​ |  | (84)
​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-hedging derivatives: | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |
Interest rate lock commitments | ​ |  | — |  | Other income | ​ |  | — |  | Other Income | ​ |  | 52
Total non-hedging derivatives | ​ | ​ | — | ​ | ​ | ​ |  | — |  |  | ​ |  | 52
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total | ​ | $ | 1,768 |  |  | ​ | $ | 3,156 |  |  | ​ | $ | (630)
​ Cash flow hedges ​ Interest rate swaps on wholesale funding In March and November 2019 and April 2020, the Company entered into interest rate swaps on wholesale borrowings (the "SWAPS") to limit its exposure to rising interest rates over a five year term on 3-month FHLB borrowings or brokered certificates, or a combination thereof at each maturity date. Under the terms of the agreement, the Company has two swaps each with a $50.0 million notional amount and pays a fixed interest rate of 2.46% and 1.53% respectively and one swap with a $25.0 million notional amount and pays a fixed rate of 0.59%. The financial institution counterparty pays the Company interest on the three-month LIBOR rate. The Company designated the swap as a cash flow hedge. ​ Interest rate cap agreements In 2014, interest rate cap agreements were purchased to limit the Company’s exposure to rising interest rates on four rolling, three-month borrowings indexed to three-month LIBOR. Under the terms of the agreements, the Company paid total premiums of $4.6 million for the right to receive cash flow payments if three-month LIBOR rises above the caps of 3.00%, thus effectively ensuring interest expense on the borrowings at maximum rates of 3.00% for the duration of the agreements. The interest rate cap agreements were designated as cash flow hedges; however, the caps were terminated in the fourth quarter of 2019 and the unamortized premium totaling $3.2 million was recognized in acquisition, restructuring and other expenses. ​ Fair value hedges ​ Interest rate swap on securities For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The Company utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable securities available-for-sale. The hedging strategy on securities converts the fixed interest rates to LIBOR-based variable interest rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the call dates of the hedged securities. During 2019, the Company entered into eight swap transactions with a notional amount of $37.2 million designated as fair value hedges. These derivatives are intended to protect against the effects of changing interest rates on the fair values of fixed rate securities. The fixed rates on the transactions have a weighted average of 1.696%. ​ Economic hedges ​ Forward sale commitments The Company utilizes forward sale commitments on residential mortgage loans to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans originated for sale. The forward sale commitments are accounted for as derivatives. The Company typically uses a combination of best efforts and mandatory delivery contracts. The contracts are loan sale agreements where the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, the Company may enter into contracts just prior to the loan closing with a customer. ​ Customer loan derivatives The Company enters into customer loan derivatives to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting loan swap agreements with highly rated third-party financial institutions. The loan swap agreements are free standing derivatives and are recorded at fair value in the Company's consolidated balance sheet. The Company is party to master netting arrangements with its financial institutional counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. ​ The master netting arrangements provide for a single net settlement of all loan swap agreements, as well as collateral or cash funds, in the event of default on, or termination of, any one contract. Collateral is provided by cash or securities received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds. Currently, the Company has posted cash of $30.5 million with counterparties. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gross Amounts Offset in the Consolidated Balance Sheet
​ | ​ | Derivative | ​ | ​ | ​ | Cash Collateral | ​ | ​ | ​
(in thousands) |  | Liabilities |  | Derivative Assets |  | Pledged |  | Net Amount
As of September 30, 2020 | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
Customer Loan Derivatives: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
MNA counterparty | ​ | $ | (16,965) | ​ | $ | 16,965 | ​ | $ | 30,450 | ​ | $ | —
RPA counterparty | ​ |  | (11,071) | ​ |  | 11,071 | ​ |  | — | ​ |  | —
Total | ​ | $ | (28,036) | ​ | $ | 28,036 | ​ | $ | 30,450 | ​ | $ | —
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gross Amounts Offset in the Consolidated Balance Sheet
​ | ​ | Derivative | ​ | ​ | ​ | Cash Collateral | ​ | ​ | ​
(in thousands) |  | Liabilities |  | Derivative Assets |  | Pledged |  | Net Amount
As of December 31, 2019 | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
Customer Loan Derivatives: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
MNA counterparty | ​ | $ | (4,669) | ​ | $ | 4,669 | ​ | $ | 10,700 | ​ | $ | —
RPA counterparty | ​ |  | (3,377) | ​ |  | 3,377 | ​ |  | — | ​ |  | —
Total | ​ | $ | (8,046) | ​ | $ | 8,046 | ​ | $ | 10,700 | ​ | $ | —
​ ​ Non-hedging derivatives ​ Interest rate lock commitments The Company enters into interest rate lock commitments (“IRLCs”) for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs relate to the origination of residential mortgage loans that are held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free standing derivatives which are carried at fair value with changes recorded in non-interest income in the Company’s Consolidated Statements of Income. Changes in the fair value of IRLCs subsequent to inception are based on; (i) changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and (ii) changes in the probability when the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

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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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