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DERIVATIVES | 3 Months Ended
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Mar. 31, 2023
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
DERIVATIVES | 12. 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 $210.0 million as of March 30, 2023 and $290.0 million as of December 31, 2022 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 March 31, 2023, 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. In March 2022, the Company entered into four forward starting interest rate swaps with a total notional amount of $100.0 million. These swaps will effectively extend the interest rate protection of existing swaps for an additional two to five years. As such, they are designated as cash flow hedges of certain interest-bearing deposits. The Company will receive variable amounts and pay fixed amounts. The weighted-average fixed pay rate on these forward swaps was 3.12 percent as of March 31, 2023. As of March 31, 2023, an unrealized gain of $2.0 million was recorded in accumulated other comprehensive income related to these forward starting swaps. The tables below do not include the impact of these forward swaps. The following table presents information about the interest rate swaps designated as cash flow hedges as of March 31, 2023 and December 31, 2022:
(Dollars in thousands) |  | March 31, 2023 |  |  | December 31, 2022 |
Notional amount |  | $ | 210,000 |  |  | $ | 290,000 |
Weighted average pay rate |  |  | 1.64 | % |  |  | 1.71 | %
Weighted average receive rate |  |  | 2.84 | % |  |  | 2.78 | %
Weighted average maturity |  | 3.69 years |  |  | 2.01 years |
Unrealized gain/(loss), net |  | $ | 4,500 |  |  | $ | 3,290 |
Number of contracts |  |  | 8 |  |  |  | 12 |
|  | March 31, 2023 |
|  | Notional |  |  | Fair |
(In thousands) |  | Amount |  |  | Value |
Interest rate swaps related to interest-bearing deposits |  | $ | 210,000 |  |  | $ | 4,500 |
Total included in other assets |  |  | 210,000 |  |  |  | 4,500 |
Total included in other liabilities |  |  | — |  |  |  | — |
|  | December 31, 2022 |
|  | Notional |  |  | Fair |
(In thousands) |  | Amount |  |  | Value |
Interest rate swaps related to interest-bearing deposits |  | $ | 290,000 |  |  | $ | 3,290 |
Total included in other assets |  |  | 290,000 |  |  |  | 3,290 |
Total included in other liabilities |  |  | — |  |  |  | — |
Cash Flow Hedges The following table presents the net gains/(losses) recorded in accumulated other comprehensive income/(loss) and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended March 31, 2023 and 2022:
|  | For the Three Months Ended March 31, |
(In thousands) |  | 2023 |  |  | 2022 |
Interest rate contracts |  |  |  |  |  |
Gain/(loss) recognized in other comprehensive income (effective portion) |  | $ | (2,732 | ) |  | $ | 2,796 |
Gain/(loss) reclassified from other comprehensive income to interest expense |  |  | — |  |  |  | — |
Gain/(loss) recognized in other noninterest income |  | $ | 42 |  |  |  | — |
During the third quarter of 2022, the Company recognized an unrealized after-tax gain of $167,000 in accumulated other comprehensive income/(loss) related to the termination of two interest rate swaps designated as cash flow hedges that were deemed ineffective. The gain is being amortized into earnings over the remaining life of the terminated swaps. Net interest income/expense recorded on these swap transactions totaled $947,000 of income and $999,000 of expense for the three months ended March 31, 2023 and March 31, 2022, respectively, and is reported as a component of interest expense. 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 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 accrued interest receivable and payable related to these swaps of $798,000 and $1.1 million at March 31, 2023 and December 31, 2022, respectively, is recorded in other assets and other liabilities. Information about these swaps is as follows:
(Dollars in thousands) |  | March 31, 2023 |  |  | December 31, 2022 |
Notional amount |  | $ | 607,365 |  |  | $ | 612,211 |
Fair value |  | $ | (28,402 | ) |  | $ | (37,173 | )
Weighted average pay rates |  |  | 3.99 | % |  |  | 3.99 | %
Weighted average receive rates |  |  | 6.60 | % |  |  | 6.14 | %
Weighted average maturity |  | 4.44 years |  |  | 4.68 years |
Number of contracts |  |  | 78 |  |  |  | 78 |

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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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