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Derivative Financial Instruments | 6 Months Ended
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Jun. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | NOTE 6 – Derivative Financial Instruments The Company utilizes derivative financial instruments primarily to hedge its exposure to changes in interest rates. All derivative financial instruments are recognized as either assets or liabilities and measured at fair value. The Company accounts for all of its derivatives as free-standing derivatives and does not designate any of these instruments for hedge accounting. Therefore, the gain or loss resulting from the change in the fair value of the derivative is recognized in the Company’s statement of income during the period of change. The Company enters into commitments to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time, with clients who have applied for a loan and meet certain credit and underwriting criteria (interest rate lock commitments). These interest rate lock commitments (“IRLCs”) meet the definition of a derivative financial instrument and are reflected in the balance sheet at fair value with changes in fair value recognized in current period earnings. Unrealized gains and losses on the IRLCs are recorded as derivative assets and derivative liabilities, respectively, and are measured based on the value of the underlying mortgage loan, quoted mortgage-backed securities (“MBS”) prices and an estimate of the probability that the mortgage loan will fund within the terms of the interest rate lock commitment, net of estimated commission expenses. The Company manages the interest rate and price risk associated with its outstanding IRLCs and mortgage loans held for sale by entering into derivative instruments such as forward sales of MBS. Management expects these derivatives will experience changes in fair value opposite to changes in fair value of the IRLCs and mortgage loans held for sale, thereby reducing earnings volatility. The Company takes into account various factors and strategies in determining the portion of the mortgage pipeline (IRLCs and mortgage loans held for sale) it wants to economically hedge. The following table summarizes the Company’s outstanding financial derivative instruments at June 30, 2021 and December 31, 2020.
|  | June 30, 2021 |
|  |  |  |  |  |  | Fair Value |
(dollars in thousands) |  | Notional |  | Balance Sheet Location |  | Asset/(Liability) |
Mortgage loan interest rate lock commitments |  | $ | 51,149 |  | Other assets |  | $ | 708 |
MBS forward sales commitments |  |  | 29,500 |  | Other liabilities |  |  | (75 | )
Total derivative financial instruments |  | $ | 80,649 |  |  |  | $ | 633 |
|  | December 31, 2020 |
|  |  |  |  |  |  | Fair Value |
(dollars in thousands) |  | Notional |  | Balance Sheet Location |  | Asset/(Liability) |
Mortgage loan interest rate lock commitments |  | $ | 107,569 |  | Other assets |  | $ | 2,385 |
MBS forward sales commitments |  |  | 75,500 |  | Other liabilities |  |  | (501 | )
Total derivative financial instruments |  | $ | 183,069 |  |  |  | $ | 1,884 |

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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 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
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