XML 29 R20.htm IDEA: XBRL DOCUMENT v3.22.2.2

Note 12 - Derivative Financial Instruments

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 12 – Derivative Financial Instruments

The Bancorp uses derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities. The Bancorp has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Consolidated Balance Sheet and do not take into account the effects of master netting agreements. Master netting agreements allow the Bancorp to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Bancorp enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Bancorp agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Bancorp agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Bancorp’s results of operations.

The Bancorp enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (i.e., interest rate lock commitment). The interest rate lock commitments are considered derivatives and are recorded on the accompanying consolidated balance sheets at fair value in accordance with FASB ASC 815, Derivatives and Hedging.

The following table shows the amounts of non-hedging derivative financial instruments:

June 30, 2022
					Asset derivatives						Liability derivatives
(Dollars in thousands)		Notational or contractual amount			Statement of Financial Condition classification		Fair value				Statement of Financial Condition classification				Fair value
Interest rate swap contracts		$	92,565		Other assets		$	6,696			Other liabilties				$	6,696
Interest rate lock commitments			3,965		Other assets			73				N/A				-
Total		$	96,530				$	6,769							$	6,696

December 31, 2021
					Asset derivatives						Liability derivatives
(Dollars in thousands)		Notational or contractual amount			Statement of Financial Condition classification		Fair value				Statement of Financial Condition classification				Fair value
Interest rate swap contracts		$	94,154		Other assets		$	2,686			Other liabilties				$	2,686
Interest rate lock commitments			7,837		Other assets			141				N/A				-
Total		$	101,991				$	2,827							$	2,686

The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments:

			Six Months Ended
			June 30,
(Dollars in thousands)	Statement of Income Classification		2022				2021
Interest rate swap contracts	Fees and service charges		$	-			$	218
Interest rate lock commitments	Gain on sale of loans held-for-sale, net			(68	)			(128	)
Total			$	(68	)		$	90

			Three Months Ended
			June 30,
(Dollars in thousands)	Statement of Income Classification		2022				2021
Interest rate swap contracts	Fees and service charges		$	-			$	231
Interest rate lock commitments	Gain on sale of loans held-for-sale, net			(93	)			(151	)
Total			$	(93	)		$	80

The following table shows the offsetting of financial assets and derivative assets:

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in thousands)		Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statement of Financial Condition				Net Amounts of Assets Presented in the Statement of Financial Condition				Financial Instruments				Cash Collateral Received				Net Amount
June 30, 2022
Interest rate swap contracts		$	6,696			$	-			$	6,696			$	-			$	-			$	6,696
Interest rate lock commitments			73				-				73				-				-				73
Total		$	6,769			$	-			$	6,769			$	-			$	-			$	6,769

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in thousands)		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statement of Financial Condition				Net Amounts of Liabilities Presented in the Statement of Financial Condition				Financial Instruments				Cash Collateral Received				Net Amount
December 31, 2021
Interest rate swap contracts		$	2,686			$	-			$	2,686			$	-			$	-			$	2,686
Interest rate lock commitments			141				-				141				-				-				141
Total		$	2,827			$	-			$	2,827			$	-			$	-			$	2,827

The following table shows the offsetting of financial liabilities and derivative liabilities:

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in thousands)		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statement of Financial Condition				Net Amounts of Liabilities Presented in the Statement of Financial Condition				Financial Instruments				Cash Collateral Pledged				Net Amount
June 30, 2022
Interest rate swap contracts		$	6,696			$	-			$	6,696			$	-			$	3,930			$	2,766
Total		$	6,696			$	-			$	6,696			$	-			$	3,930			$	2,766

														Gross Amounts not Offset in the
														Statement of Financial Condition
(Dollars in thousands)		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statement of Financial Condition				Net Amounts of Liabilities Presented in the Statement of Financial Condition				Financial Instruments				Cash Collateral Pledged				Net Amount
December 31, 2021
Interest rate swap contracts		$	2,686			$	-			$	2,686			$	-			$	3,930			$	(1,244	)
Total		$	2,686			$	-			$	2,686			$	-			$	3,930			$	(1,244	)

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 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

Name:	us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix:	us-gaap_
Data Type:	dtr-types:textBlockItemType
Balance Type:	na
Period Type:	duration

X

- References

No definition available.

+ Details

Name:	us-gaap_DisclosureTextBlockAbstract
Namespace Prefix:	us-gaap_
Data Type:	xbrli:stringItemType
Balance Type:	na
Period Type:	duration