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Note 13 - Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2023
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | Note 13 – 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:
September 30, 2023 |  |  |  |  |
| Asset derivatives |  |  | Liability derivatives |
(Dollars in thousands) | Statement of Financial Condition classification |  | Fair value |  |  | Statement of Financial Condition classification |  |  | Fair value |
Interest rate swap contracts | Other assets |  | $ | 9,834 |  |  | Other liabilties |  |  | $ | 9,834 |
Interest rate lock commitments | Other assets |  |  | 51 |  |  |  | N/A |  |  |  | - |
Total |  | $ | 9,885 |  |  |  |  |  |  | $ | 9,834 |
December 31, 2022 |  |  |  |  |
| Asset derivatives |  |  | Liability derivatives |
(Dollars in thousands) | Statement of Financial Condition classification |  | Fair value |  |  | Statement of Financial Condition classification |  |  | Fair value |
Interest rate swap contracts | Other assets |  | $ | 8,972 |  |  | Other liabilties |  |  | $ | 8,972 |
Interest rate lock commitments | Other assets |  |  | 38 |  |  |  | N/A |  |  |  | - |
Total |  | $ | 9,010 |  |  |  |  |  |  | $ | 8,972 |
The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments:
|  |  | Three Months Ended |
|  |  | September 30, |
(Dollars in thousands) | Statement of Income Classification |  | 2023 |  |  | 2022 |
Interest rate swap contracts | Fees and service charges |  | $ | (37 | ) |  | $ | 3 |
Interest rate lock commitments | Gain on sale of loans held-for-sale, net |  |  | (36 | ) |  |  | (42 | )
Total |  | $ | (73 | ) |  | $ | (39 | )
|  |  | Nine Months Ended |
|  |  | September 30, |
(Dollars in thousands) | Statement of Income Classification |  | 2023 |  |  | 2022 |
Interest rate swap contracts | Fees and service charges |  | $ | 328 |  |  | $ | 3 |
Interest rate lock commitments | Gain on sale of loans held-for-sale, net |  |  | 12 |  |  |  | (110 | )
Total |  | $ | 340 |  |  | $ | (107 | )
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 |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 9,834 |  |  | $ | - |  |  | $ | 9,834 |  |  | $ | - |  |  | $ | 5,470 |  |  | $ | 4,364 |
Interest rate lock commitments |  |  | 51 |  |  |  | - |  |  |  | 51 |  |  |  | - |  |  |  | - |  |  |  | 51 |
Total |  | $ | 9,885 |  |  | $ | - |  |  | $ | 9,885 |  |  | $ | - |  |  | $ | 5,470 |  |  | $ | 4,415 |
|  |  |  |  |  |  |  |  |  |  |  |  |  | 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, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 8,972 |  |  | $ | - |  |  | $ | 8,972 |  |  | $ | - |  |  | $ | - |  |  | $ | 8,972 |
Interest rate lock commitments |  |  | 38 |  |  |  | - |  |  |  | 38 |  |  |  | - |  |  |  | - |  |  |  | 38 |
Total |  | $ | 9,010 |  |  | $ | - |  |  | $ | 9,010 |  |  | $ | - |  |  | $ | - |  |  | $ | 9,010 |
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 |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 9,834 |  |  | $ | - |  |  | $ | 9,834 |  |  | $ | - |  |  | $ | - |  |  | $ | 9,834 |
Total |  | $ | 9,834 |  |  | $ | - |  |  | $ | 9,834 |  |  | $ | - |  |  | $ | - |  |  | $ | 9,834 |
|  |  |  |  |  |  |  |  |  |  |  |  |  | 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, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contracts |  | $ | 8,972 |  |  | $ | - |  |  | $ | 8,972 |  |  | $ | - |  |  | $ | 3,930 |  |  | $ | 5,042 |
Total |  | $ | 8,972 |  |  | $ | - |  |  | $ | 8,972 |  |  | $ | - |  |  | $ | 3,930 |  |  | $ | 5,042 |

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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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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