XML 24 R14.htm IDEA: XBRL DOCUMENT v3.21.2
Derivative Instruments and Hedging Activities
 9 Months Ended
Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Interest Rate Swaps
In accordance with applicable accounting guidance for derivatives and hedging, all derivatives are recognized as either assets or liabilities on the balance sheet at fair value. Interest rate swaps are contracts in which a series of cash flows (fixed and variable) are exchanged over a prescribed period. The notional amounts on which the interest payments are based are not exchanged. These derivative positions relate to transactions in which we enter into an interest rate swap with a commercial customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed rate. At the same time, we agree 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 our customer to effectively convert a variable rate loan to a fixed rate loan with us receiving a variable rate. These agreements could have floors or caps on the contracted interest rates.
Pursuant to our agreements with various financial institutions, we may receive collateral or may be required to post collateral based upon mark-to-market positions. Beyond unsecured threshold levels, collateral in the form of cash or securities may be made available to counterparties of interest rate swap transactions. Our current collateral requirements do not have a material effect on our cash flow or liquidity position.
Derivatives contain an element of credit risk, the possibility that we will incur a loss because a counterparty, which may be a financial institution or a customer, fails to meet its contractual obligations. All derivative contracts with financial institutions may be executed only with counterparties approved by our Asset and Liability Committee, or ALCO, and derivatives with customers may only be executed with customers within credit exposure limits approved by our Senior Loan Committee. Interest rate swaps are considered derivatives but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the derivatives are recorded in current earnings and included in other noninterest income in the Condensed Consolidated Statements of Comprehensive Income (Loss).
Interest Rate Lock Commitments and Forward Sale Contracts
In the normal course of business, we sell originated mortgage loans into the secondary mortgage loan market. We also offer interest rate lock commitments to potential borrowers. The commitments are generally for a period of 60 days and guarantee a specified interest rate for a loan if underwriting standards are met, but the commitment does not obligate the potential borrower to close on the loan. Accordingly, some commitments expire prior to becoming loans. We may encounter pricing risks if interest rates increase significantly before the loan can be closed and sold. We may utilize forward sale contracts in order to mitigate this pricing risk. Whenever a customer desires these products, a mortgage originator quotes a secondary market rate guaranteed for that day by the investor. The rate lock is executed between the mortgagee and us and in turn a forward sale contract may be executed between us and the investor. Both the rate lock commitment and the corresponding forward sale contract for each customer are considered derivatives but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the derivatives during the commitment period are recorded in current earnings and included in mortgage banking in the Condensed Consolidated Statements of Comprehensive Income (Loss).
    The following table indicates the amounts representing the value of derivative assets and derivative liabilities as of the dates presented:
Derivatives
(included in Other Assets)		Derivatives
(included in Other Liabilities)
(dollars in thousands)September 30, 2021December 31, 2020September 30, 2021December 31, 2020
Derivatives not Designated as Hedging Instruments:
Interest Rate Swap Contracts - Commercial Loans
Fair value$42,177 $78,319 $42,554 $79,033 
Notional amount998,385 983,638 998,385 983,638 
Collateral posted— — 43,190 77,930 
Interest Rate Lock Commitments - Mortgage Loans
Fair value812 2,900 — — 
Notional amount22,674 51,053 — — 
Forward Sale Contracts - Mortgage Loans
Fair value101 — — 385 
Notional amount$18,915 $— $— $47,062 
Presenting offsetting derivatives that are subject to legally enforceable netting arrangements with the same party is permitted. For example, we may have a derivative asset and a derivative liability with the same counterparty to a swap transaction and we are permitted to offset the asset position and the liability position resulting in a net presentation.
The following table indicates the gross amounts of commercial loan swap derivative assets and derivative liabilities, the amounts offset and the carrying values in the Consolidated Balance Sheets as of the dates presented:
Derivatives
(included in Other Assets)		Derivatives
(included in Other Liabilities)
(dollars in thousands)September 30, 2021December 31, 2020September 30, 2021December 31, 2020
Derivatives not Designated as Hedging Instruments:
Gross amounts recognized$43,746 $82,655 $44,170 $82,626 
Gross amounts offset(1,569)(4,336)(1,616)(3,593)
Net Amounts Presented in the Consolidated Balance Sheets42,177 78,319 42,554 79,033 
Gross amounts not offset(1)
— — (43,190)(77,930)
Net Amount$42,177 $78,319 $(636)$1,103 
(1) Amounts represent collateral posted for the periods presented and included in other assets on our Consolidated Balance Sheets.
The following table indicates the gain or loss recognized in income on derivatives for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2021202020212020
Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial loans$22 $(537)$337 $(485)
Interest rate lock commitments—mortgage loans192 86 712 2,877 
Forward sale contracts—mortgage loans(325)144 (2,314)(451)
Total Derivatives (Loss)/Gain$(111)$(307)$(1,265)$1,941