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DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended
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Dec. 31, 2022
DERIVATIVE FINANCIAL INSTRUMENTS |
DERIVATIVE FINANCIAL INSTRUMENTS | ​ ​ 20. DERIVATIVE FINANCIAL INSTRUMENTS ​ The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements and risk participation agreements (RPAs) which contain master netting and collateral provisions designed to protect the party at risk. Interest rate swaps with commercial loan banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party, such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The aggregate notional amount of interest rate swaps was $155,214,000 at December 31, 2022 and $123,094,000 at December 31, 2021. The Corporation originated one interest rate swap with a notional amount of $24,000,000 in 2022 and originated no interest rate swaps in 2021. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at December 31, 2022. The net impact of interest rate swaps on interest income on loans was a reduction of $342,000 in 2022, $1,347,000 in 2021 and $698,000 in 2020. Fee income on the interest swap originated in 2022 of $290,000 is included in other noninterest income in the consolidated statements of income. The Corporation has entered into an RPA with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA In.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation purchased an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA Out.” The net impact on the consolidated statements of income from RPAs was a reduction in other noninterest income of $14,000 in 2022. The Corporation did not enter into any RPAs prior to 2022. The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the consolidated balance sheets at December 31, 2022 and 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(In Thousands) | At December 31, 2022 | ​ | At December 31, 2021
​ | Asset Derivatives | ​ | Liability Derivatives | ​ | Asset Derivatives | ​ | Liability Derivatives
​ | Notional | ​ | Fair | ​ | Notional | ​ | Fair | ​ | Notional | ​ | Fair | ​ | Notional | ​ | Fair
​ | Amount | ​ | Value (1) | ​ | Amount | ​ | Value (2) | ​ | Amount | ​ | Value (1) | ​ | Amount | ​ | Value (2)
Interest rate swap agreements | $ | 77,607 | ​ | $ | 3,638 | ​ | $ | 77,607 | ​ | $ | 3,638 | ​ | $ | 61,547 | ​ | $ | 3,104 | ​ | $ | 61,547 | ​ | $ | 3,104
RPA Out | ​ | 7,200 | ​ | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 0
RPA In | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 10,000 | ​ | ​ | 19 | ​ | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 0 | ​ | ​ | 0
​
(1) | Included in other assets in the consolidated balance sheets.
(2) | Included in accrued interest and other liabilities in the consolidated balance sheets.
The Corporation’s agreements with its derivative counterparties provide that if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations. Further, if the Corporation were to fail to maintain its status as a well or adequately capitalized institution, then the counterparties could terminate the derivative positions and the Corporation would be required to settle its obligations under the agreements. Available-for-sale securities with a carrying value of $2,259,000 were pledged as collateral against the Corporation’s liability related to the interest rate swaps at December 31, 2022.

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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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