XML 30 R21.htm IDEA: XBRL DOCUMENT
v3.23.2

Derivative Financial Instruments | 6 Months Ended
--- | ---
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | 12. DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of certain balance sheet assets and liabilities. In the normal course of business, the Company also uses derivative financial instruments to add stability to interest income or expense and to manage its exposure to movements in interest rates. The Company does not use derivatives for trading or speculative purposes and only enters into transactions that have a qualifying hedge relationship. The Company’s hedging strategies involving interest rate derivatives are classified as either cash flow hedges or fair value hedges, depending upon the rate characteristic of the hedged item. Active Hedges During the second quarter of 2023, the Company entered into three forward interest rate swap contracts on a pool of fixed rate indirect consumer loans. Each of the three hedge contracts has a $10.0 million notional amount. The interest rate swaps were designated as derivative instruments in fair value hedges with the objective of effectively converting a pool of fixed rate indirect consumer loans to a variable rate throughout the hedge durations in accordance with the portfolio layer method. Under the contractual arrangements, for each swap, the Company pays a fixed interest rate and receives a variable interest rate based on the Secured Overnight Financing Rate (SOFR), on the notional amounts, with monthly net settlements. Hedges Terminated in 2023 In February 2023, the Company voluntarily terminated four interest rates swap agreements each with notional amounts of $10.0 million, or an aggregate amount of $40.0 million. Two of the swaps were previously designated as cash flow hedges, while two were previously designated as fair value hedges. The termination of the cash flow hedges resulted in a net unrealized gain totaling $1.1 million. The unrealized gain was initially recorded in accumulated other comprehensive income, net of tax, and is being reclassified to reduce interest expense over the original terms of the swap contracts. The termination of the fair value hedges resulted in an unrealized gain totaling $1.0 million which is being reclassified to increase interest income over the original terms of the swap contracts. Hedge Terminated in 2022 In May 2022, the Company voluntarily terminated one interest rate swap agreement with a notional amount of $10.0 million. The swap was previously designated as a cash flow hedge. The termination resulted in a net unrealized gain of $0.3 million. The unrealized gain was initially recorded in accumulated other comprehensive income, net of tax, and is being reclassified to reduce interest expense over the original term of the swap contract. Presentation The table below reflects the notional amount and fair value of active derivative instruments included on the Company’s consolidated balance sheets on a net basis as of June 30, 2023 and December 31, 2022.
|  | As of June 30, 2023 |  |  | As of December 31, 2022 |
|  | Notional |  |  | Estimated Fair Value |  |  | Notional |  |  | Estimated Fair Value |
|  | Amount |  |  | Gain (Loss) (1) |  |  | Amount |  |  | Gain (Loss) (1) |
|  | (Dollars in Thousands) |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps related to fixed rate commercial real estate loans |  | $ | - |  |  | $ | - |  |  | $ | 20,000 |  |  | $ | 1,101 |
Interest rate swaps related to fixed rate indirect consumer loans |  |  | 30,000 |  |  |  | 281 |  |  |  | - |  |  |  | - |
Total fair value hedges |  |  |  |  |  | 281 |  |  |  |  |  |  | 1,101 |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps related to variable-rate money market deposit accounts |  |  | - |  |  |  | - |  |  | $ | 20,000 |  |  |  | 1,205 |
Interest rate swaps related to FHLB advances |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total cash flow hedges |  |  |  |  |  | — |  |  |  |  |  |  | 1,205 |
Total hedges designated as hedging instruments, net |  |  |  |  | $ | 281 |  |  |  |  |  | $ | 2,306 |
(1) Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities in the consolidated balance sheets. The following table presents the net effects of derivative hedging instruments on the Company’s interim condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022. The effects, which include the reclassification of unrealized gains on terminated swap contracts, are presented as either an increase or decrease to income before income taxes in the relevant caption of the Company’s interim condensed consolidated statements of operations.
Location in the Condensed |  | Three Months Ended |  |  | Six Months Ended |
Consolidated Statements of Operations |  | June 30, 2023 |  |  | June 30, 2022 |  |  | June 30, 2023 |  |  | June 30, 2022 |
|  |  |  | (Dollars in Thousands) |  |  | (Dollars in Thousands) |
Interest income |  | Interest and fees on loans |  | $ | 157 |  |  | $ | (28 | ) |  | $ | 325 |  |  | $ | (87 | )
Interest expense |  | Interest on deposits |  |  | 36 |  |  |  | 14 |  |  |  | 72 |  |  |  | (16 | )
Interest expense |  | Interest on borrowings |  |  | 120 |  |  |  | (48 | ) |  |  | 256 |  |  |  | (127 | )
|  | Net increase (decrease) to income before income taxes |  | $ | 313 |  |  | $ | (62 | ) |  | $ | 653 |  |  | $ | (230 | )

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

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