XML 29 R19.htm IDEA: XBRL DOCUMENT
v3.21.2

DERIVATIVES | 9 Months Ended
--- | ---
Sep. 30, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
DERIVATIVES | 11. DERIVATIVES The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with a notional amount of $230.0 million as of September 30, 2021 and $270.0 million as of December 31, 2020 were designated as cash flow hedges of certain interest-bearing deposits. On a quarterly basis, the Company performs a qualitative hedge effectiveness assessment. This assessment takes into consideration any adverse developments related to the counterparty’s risk of default and any negative events or circumstances that affect the factors that originally enabled the Company to assess that it could reasonably support, qualitatively, an expectation that the hedging relationship was and will continue to be highly effective. As of September 30, 2021, there were no events or market conditions that would result in hedge ineffectiveness. The aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. The following table presents information about the interest rate swaps designated as cash flow hedges as of September 30, 2021 and December 31, 2020:
(Dollars in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Notional amount |  | $ | 230,000 |  |  | $ | 270,000 |
Weighted average pay rate |  |  | 1.99 | % |  |  | 1.93 | %
Weighted average receive rate |  |  | 0.21 | % |  |  | 0.22 | %
Weighted average maturity |  | 1.29 years |  |  | 2.02 years |
Unrealized loss, net |  | $ | (5,267 | ) |  | $ | (9,616 | )
Number of contracts |  |  | 11 |  |  |  | 13 |
Net interest expense recorded on these swap transactions totaled $1.0 million and $3.3 million for the three and nine months ended September 30, 2021, respectively. Net interest expense recorded on these swap transactions totaled $1.1 million and $2.4 million for the three months and nine months ended September 30, 2020, respectively. Cash Flow Hedges The following table presents the net gain/(loss) recorded in accumulated other comprehensive income/(loss) and the consolidated financial statements relating to the cash flow derivative instruments for the three months and nine months ended September 30, 2021 and 2020:
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
(In thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Interest rate contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain/(loss) recognized in other comprehensive income (effective portion) |  | $ | 673 |  |  | $ | 1,026 |  |  | $ | 3,127 |  |  | $ | (5,404 | )
Gain/(loss) reclassified from other comprehensive income to interest expense |  |  | — |  |  |  | (4 | ) |  |  | — |  |  |  | (63 | )
Gain/(loss) recognized in other noninterest income |  |  | — |  |  |  | — |  |  |  | (842 | ) |  |  | — |
During the first quarter of 2020, the Company recognized an unrealized after-tax gain of $26,000 in accumulated other comprehensive income/(loss) related to the termination of three interest rate swaps designated as cash flow hedges. During the second quarter of 2019, the Company recognized an unrealized after-tax gain of $189,000 in accumulated other comprehensive income/(loss) related to the termination of four interest rate swaps designated as cash flow hedges. These gains were amortized into earnings over the remaining life of the terminated swaps and completed amortization as of December 31, 2020. The Company did not recognize pre-tax interest income for the three and nine months ended September 30, 2021 related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges. The Company recognized pre-tax interest income of $5,000 and $85,000 for the three and nine months ended September 30, 2020 related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges. During the second quarter of 2021, the Bank terminated interest rate swaps with a notional amount of $40.0 million. The interest rate swaps were designated as cash flow hedges in which the Bank received a variable payment from our counterparty in exchange for making fixed-rate payments over the life of the swap agreements. Due to increased liquidity levels, management made the decision to pay off certain interest-bearing deposit liabilities that were being hedged. These liabilities will not be replaced; therefore, it will no longer be probable that the original forecasted transactions subject to the cash flow hedges will occur. As a result, the pre-tax loss on the termination of the interest rate swaps of $842,000 was recorded in the income statement for the nine months ended September 30, 2021.
|  | September 30, 2021 |
|  | Notional |  |  | Fair |
(In thousands) |  | Amount |  |  | Value |
Interest rate swaps related to interest-bearing deposits |  | $ | 230,000 |  |  | $ | (5,267 | )
Total included in other assets |  |  | — |  |  |  | — |
Total included in other liabilities |  |  | 230,000 |  |  |  | (5,267 | )
|  | December 31, 2020 |
|  | Notional |  |  | Fair |
(In thousands) |  | Amount |  |  | Value |
Interest rate swaps related to interest-bearing deposits |  | $ | 270,000 |  |  | $ | (9,616 | )
Total included in other assets |  |  | — |  |  |  | — |
Total included in other liabilities |  |  | 270,000 |  |  |  | (9,616 | )
Derivatives Not Designated as Accounting Hedges: The Company offers facility specific/loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution/swap counterparty (loan level / back-to-back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. The Company recorded a swap valuation provision of $1.4 million related to a commercial real estate loan placed on non-accrual status during the third quarter of 2021. The accrued interest receivable and payable of $4.7 million related to our swaps is recorded in other assets and other liabilities as of September 30, 2021. Information about these swaps is as follows:
(Dollars in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Notional amount |  | $ | 730,966 |  |  | $ | 823,134 |
Fair value (A) |  | $ | 47,821 |  |  | $ | 79,529 |
Weighted average pay rates |  |  | 3.98 | % |  |  | 4.02 | %
Weighted average receive rates |  |  | 1.81 | % |  |  | 1.91 | %
Weighted average maturity |  | 5.8 years |  |  | 6.5 years |
Number of contracts |  |  | 87 |  |  |  | 95 |
| (A) | The September 30, 2021 amount includes the fair value of the loan level swap asset of $43.1 million plus accrued interest receivable of $4.7 million on back-to-back swap loans.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 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 http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration