XML 41 R14.htm IDEA: XBRL DOCUMENT v3.22.2
Derivative Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Derivatives Designated as Hedging Instruments
Cash Flow Hedges of Interest Rate Risk
As part of our interest rate risk management strategy, we use interest rate swaps to add stability to interest income and to manage exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for making variable rate payments over the life of the agreements without exchange of the underlying notional amount.
For designated derivatives that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are received on variable rate assets. During the next twelve months, we estimate that an additional $2.3 million will be reclassified as a decrease to interest income.
Derivatives Not Designated as Hedging Instruments
Interest Rate Contracts with Customers
Interest rate swaps with customers 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.
Interest rate swaps with customers 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 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 for the dates presented:
Derivative Assets
(Included in Other Assets)		Derivative Liabilities
(Included in Other Liabilities)
June 30, 2022December 31, 2021June 30, 2022December 31, 2021
(dollars in thousands)Notional
 Amount		Fair
Value		Notional AmountFair
Value		Notional
 Amount		Fair
 Value		Notional
 Amount		Fair
 Value
Derivatives Designated as Hedging Instruments
Interest rate swap contracts - cash flow hedge (1)
$50,000 $368 $— $250,000 $5,946 $— 
Total Derivatives Designated as Hedging Instruments$368 $— $5,946 $— 
Derivatives Not Designated as Hedging Instruments
Interest rate swap contracts - commercial loans$1,039,932 $51,097 $1,017,178 $33,528 $1,039,932 $51,193 $1,017,178 $33,361 
Interest rate lock commitments - mortgage loans2,062 56 12,148 401 — — — — 
Forward sales contracts - mortgage loans— — 8,436 4 645 2 — — 
Total Derivatives Not Designated as Hedging Instruments$51,153 $33,933 $51,195 $33,361 
Total Derivatives$51,521 $33,933 $57,141 $33,631 
(1) Derivative assets and derivative liabilities include interest receivable of $0.6 million and $0.2 million as of June 30,2022.
The following table indicates the gross amounts of interest rate swap derivative assets and derivative liabilities, the amounts offset and the carrying values in the Consolidated Balance Sheets at the dates presented:

Derivatives (included
in Other Assets)		Derivatives (included
in Other Liabilities)
(dollars in thousands)June 30, 2022December 31, 2021June 30, 2022December 31, 2021
Gross amounts recognized$52,493 $37,289 $58,192 $37,392 
Gross amounts offset(1,028)(3,761)(1,053)(3,761)
Net amounts presented in the Consolidated Balance Sheets51,465 33,528 57,139 33,631 
Cash collateral received/pledged(1)
(43,543)— — (33,631)
Net Amount$7,922 $33,528 $57,139 $— 
(1) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess cash collateral, if any, is not reflected above.

The following table presents the effect of the cash flow hedges on OCI and on the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three month periods presented:
Amount of Gain or (Loss) Recognized in Other Comprehensive IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Income
(dollars in thousands)June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap contracts - cash flow hedge$(3,271)$— $786 $— 
Total$(3,271)$— $786 $— 
The following table presents the effect of the cash flow hedges on OCI and on the Condensed Consolidated Statements of Comprehensive Income (Loss) for the six month periods presented:
Amount of Gain or (Loss) Recognized in Other Comprehensive IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Income
(dollars in thousands)June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap contracts - cash flow hedge$(5,872)$— $922 $— 
Total$(5,872)$— $922 $— 

The following table indicates the gain or loss recognized in income on derivatives not designated as hedging instruments for the periods presented:
Three months ended June 30,Six months ended June 30,
(dollars in thousands)2022202120222021
Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial loans$(61)$5 $7 $315 
Interest rate lock commitments—mortgage loans(129)(883)(346)(2,642)
Forward sale contracts—mortgage loans(194)194 (5)1,173 
Total Derivatives (Loss) Gain$(384)$(684)$(344)$(1,154)