XML 28 R18.htm IDEA: XBRL DOCUMENT v3.22.2.2
Derivative Instruments
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments
(In Thousands)
The Company uses certain derivative instruments to meet the needs of customers as well as to manage the interest rate risk associated with certain transactions.
Non-hedge derivatives
The Company enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with these customer contracts, the Company enters into an offsetting derivative contract position. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures.
The Company enters into interest rate lock commitments with its customers to mitigate the interest rate risk associated with the commitments to fund fixed-rate and adjustable-rate residential mortgage loans. The Company also enters into forward commitments to sell residential mortgage loans to secondary market investors.
The following table provides a summary of the Company’s derivatives not designated as hedging instruments as of the dates presented:
 Balance SheetSeptember 30, 2022December 31, 2021
 LocationNotional AmountFair ValueNotional AmountFair Value
Derivative assets:
  Interest rate contractsOther Assets$223,569 $11,343 $185,447 $4,711 
  Interest rate lock commitmentsOther Assets44,785 657 310,941 5,304 
Forward commitmentsOther Assets225,000 8,941 280,000 667 
Totals$493,354 $20,941 $776,388 $10,682 
Derivative liabilities:
  Interest rate contractsOther Liabilities$223,569 $11,343 $185,447 $4,711 
Interest rate lock commitmentsOther Liabilities84,830 1,861 19,961 43 
  Forward commitmentsOther Liabilities10,000 49 320,000 736 
Totals$318,399 $13,253 $525,408 $5,490 
Gains and losses included in the Consolidated Statements of Income related to the Company’s derivative financial instruments were as follows as of the dates presented:
Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Interest rate contracts:
Included in interest income on loans$811 $589 $1,255 $1,795 
Interest rate lock commitments:
Included in mortgage banking income(4,046)(3,251)(6,466)(12,655)
Forward commitments
Included in mortgage banking income9,381 5,310 8,962 8,590 
Total$6,146 $2,648 $3,751 $(2,270)
Derivatives designated as cash flow hedges
Cash flow hedge relationships mitigate exposure to the variability of future cash flow or other forecasted transactions. The Company uses both interest rate swap contracts and interest rate collars in an effort to manage future interest rate exposure on borrowings. The swap hedging strategy converts the LIBOR-based variable interest rate on the forecasted borrowings to a fixed interest rate. The collar hedging strategy stabilizes interest rate fluctuation by setting both a floor and a cap. The Company entered into an interest rate collar in June 2022 with a 2.25% floor and 4.57% cap. The Company entered into a second interest rate collar in October 2022 with a 2.75% floor and 4.75% cap. As of September 30, 2022, the Company is hedging its exposure to the variability of future cash flows through 2032 and a portion of these hedges are forward starting.
The following table provides a summary of the Company’s derivatives designated as cash flow hedges as of the dates presented:
 Balance SheetSeptember 30, 2022December 31, 2021
 LocationNotional AmountFair ValueNotional AmountFair Value
Derivative assets:
  Interest rate swapsOther Assets$130,000 $25,266 $100,000 $7,016 
Derivative liabilities:
  Interest rate swapsOther Liabilities$— $— $62,000 $2,902 
  Interest rate collarsOther Liabilities250,000 1,934 — — 
Totals$250,000 $1,934 $62,000 $2,902 
Changes in fair value of the cash flow hedges are, to the extent that the hedging relationship is effective, recorded as other comprehensive income and are subsequently recognized in earnings at the same time that the hedged item is recognized in earnings. The ineffective portions of the changes in fair value of the hedging instruments are immediately recognized in earnings. The assessment of the effectiveness of the hedging relationship is evaluated under the hypothetical derivative method.
There were no ineffective portions for the nine months ended September 30, 2022 or 2021. The impact on other comprehensive income for the nine months ended September 30, 2022 and 2021 is discussed in Note 13, “Other Comprehensive Income (Loss).”
Derivatives designated as fair value hedges
Fair value hedges protect against changes in the fair value of an asset, liability, or firm commitment. The Company enters into interest rate swap agreements to manage interest rate exposure on certain of the Company’s fixed-rate subordinated notes. The agreements convert the fixed interest rates to LIBOR-based variable interest rates.
The following table provides a summary of the Company's derivatives designated as fair value hedges as of the dates presented:
 Balance SheetSeptember 30, 2022December 31, 2021
 LocationNotional AmountFair ValueNotional AmountFair Value
Derivative liabilities:
  Interest rate swapsOther Liabilities$100,000 $20,643 $100,000 $5,411 
The following table presents the effects of the Company’s fair value hedge relationships on the Consolidated Statements of Income for the periods presented:
 Amount of Gain (Loss) Recognized in Income
Income StatementThree Months Ended September 30,Nine Months Ended September 30,
 Location2022202120222021
Derivative liabilities:
  Interest rate swaps - subordinated notesInterest Expense$(10,495)$(764)$(15,232)$(4,941)
Derivative liabilities - hedged items:
  Interest rate swaps - subordinated notesInterest Expense$10,495 $764 $15,232 $4,941 
The following table presents the amounts that were recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges as of the dates presented:
Carrying Amount of the Hedged LiabilityCumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Liability
Balance Sheet LocationSeptember 30, 2022December 31, 2021September 30, 2022December 31, 2021
Long-term debt$77,984 $93,085 $20,643 $5,411 
Offsetting
Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheet when the “right of offset” exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company’s derivative instruments are subject to master netting agreements; however, the Company has not elected to offset such financial instruments in the Consolidated Balance Sheets. The following table presents the Company’s gross derivative positions as recognized in the Consolidated Balance Sheets as well as the net derivative positions, including collateral pledged to the extent the application of such collateral did not reduce the net derivative liability position below zero, had the Company elected to offset those instruments subject to an enforceable master netting agreement:
Offsetting Derivative AssetsOffsetting Derivative Liabilities
September 30,
2022		December 31, 2021September 30,
2022		December 31, 2021
Gross amounts recognized$45,510 $8,007 $22,665 $13,436 
Gross amounts offset in the Consolidated Balance Sheets— — — — 
Net amounts presented in the Consolidated Balance Sheets45,510 8,007 22,665 13,436 
Gross amounts not offset in the Consolidated Balance Sheets
Financial instruments22,665 7,208 22,665 7,208 
Financial collateral pledged— — — 6,228 
Net amounts$22,845 $799 $— $—