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DERIVATIVES AND HEDGING ACTIVITIES
 12 Months Ended
Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES AND HEDGING ACTIVITIES DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally 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 its assets and liabilities and, to a lesser extent, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are generally determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain loans. As a service to its customers, the Company may utilize derivative instruments including customer foreign exchange forward contracts to manage its foreign exchange risk, if any.
The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2020 and 2019.
 December 31, 2020December 31, 2019
 Asset derivativesLiability derivativesAsset derivativesLiability derivatives
 Balance
sheet
location		Fair 
value
(1)		Balance
sheet
location		Fair 
value
(1)		Balance
sheet
location		Fair 
value
(1)		Balance
sheet
location		Fair 
value
(1)
 (In thousands)
Derivatives designated as hedging instruments:
Interest rate swapsOther assets$— Other liabilities$228 Other assets$— Other liabilities$— 
Derivatives not designated as hedging instruments:
Interest rate customer swapsOther assets83,255 Other liabilities84,590 Other assets36,089 Other liabilities36,580 
Risk participation agreementsOther assets49 Other liabilities375 Other assets10 Other liabilities242 
Total$83,304 $85,193 $36,099 $36,822 
___________________
(1)For additional details, see Part II. Item 8. “Financial Statements and Supplementary Data - Note 21: Fair Value Measurements.”
The following table presents the effect of the Company’s derivative financial instruments in the Consolidated Statements of Operations for the years ended December 31, 2020 and 2019.
Derivatives in
Cash Flow
Hedging
Relationships		Amount of Gain or (Loss) Recognized in
OCI on Derivatives (Effective Portion) (1)
Years Ended December 31,		Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)		Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Years Ended December 31,
202020192018202020192018
(In thousands)
Interest rate swaps$(158)$(46)$990 Interest expense$70 $508 $907 
Total$(158)$(46)$990 $70 $508 $907 
___________________
(1) The guidance in ASU 2017-12 requires that amounts in Accumulated other comprehensive income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. Transition guidance for this ASU further states that upon adoption, previously recorded cumulative ineffectiveness for cash flow hedges existing at the adoption date be eliminated by means of a cumulative-effect adjustment to Accumulated other comprehensive income with a corresponding adjustment to the opening balance of Retained earnings as of the initial application date.
The Bank has agreements with its derivative counterparties that contain provisions where, if the Bank defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Bank could also be declared in default on its derivative obligations. The Bank was in compliance with these provisions as of December 31, 2020 and 2019.
The Bank also has agreements with certain of its derivative counterparties that contain provisions where, if the Bank fails to maintain its status as a well-capitalized or adequately-capitalized institution, then the counterparty could terminate the derivative positions and the Bank would be required to settle its obligations under the agreements. The Bank was in compliance with these provisions as of December 31, 2020 and 2019.
Certain of the Bank’s agreements with its derivative counterparties contain provisions where if specified events or conditions occur that materially change the Bank’s creditworthiness in an adverse manner, the Bank may be required to fully collateralize its obligations under the derivative instruments. The Bank was in compliance with these provisions as of December 31, 2020 and 2019.
As of December 31, 2020 and 2019, the termination amounts related to collateral determinations of derivatives in a liability position were $85.6 million and $35.7 million, respectively. The Company has minimum collateral posting thresholds with its derivative counterparties. As of December 31, 2020 and 2019, the Company had pledged securities with a market value of $86.7 million and $40.0 million, respectively, against its obligations under these agreements. The collateral posted is typically greater than the current liability position; however, due to timing of liability position changes at period end, the funding of a collateral shortfall may take place shortly following period end.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements.
To accomplish this objective and strategy, the Bank has entered into one interest rate swap during 2020 with an effective date of April 14, 2020. The interest rate swap is designated as a cash flow hedge and involves the receipt of variable rate amounts from a counterparty in exchange for the Bank making fixed payments.
The interest rate swap entered into during 2020 has a notional amount of $100 million and a term of 18 months from its respective effective date. The interest rate swap will effectively fix the Bank's interest payments on $100 million of rolling three-month FHLB advances at a rate of 0.48%. As of December 31, 2019, there were no cash flow hedges.
Per ASU 2017-12, for derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. For active cash flow hedges, a portion of the balance reported in Accumulated other comprehensive income related to derivatives will be reclassified to Interest expense as interest payments are made or received on the Bank’s interest rate swaps.
Non-designated Hedges
Derivatives not designated as hedges are not speculative and result from two different services the Bank provides to qualified Commercial clients. The Bank offers certain derivative products directly to such clients. The Bank economically hedges derivative transactions executed with Commercial clients by entering into mirror-image, offsetting derivatives with third parties. Derivative transactions executed as part of these programs are not designated in ASC 815, Derivatives and Hedging ("ASC 815"), qualifying hedging relationships, and therefore, they are marked-to-market through earnings each period. Because the derivatives have mirror-image contractual terms, the changes in fair value substantially offset through earnings. The net effect on earnings is primarily driven by changes in the credit valuation adjustment (“CVA”). The CVA represents the dollar amount of fair value adjustment related to nonperformance risk of both the Bank and its counterparties. Fees earned in connection with the execution of derivatives related to this program are recognized in the Consolidated Statements of Operations in Other income. As of December 31, 2020 and 2019, the Bank had 208 and 198 derivatives, respectively, related to this program, comprised of interest rate swaps and caps, with an aggregate notional amount of $1.7 billion and $1.6 billion, respectively. As of December 31, 2020 and 2019, there were no foreign currency exchange contracts.
In addition, as a participant lender, the Bank has guaranteed performance on the pro-rated portion of swaps executed by other financial institutions. As the participant lender, the Bank is providing a partial guarantee, but is not a direct party to the related swap transactions. The Bank has no obligations under the risk participation agreements unless the borrower defaults on their swap transaction with the lead bank and the swap is in a liability position to the borrower. In that instance, the Bank has agreed to pay the lead bank a portion of the swap’s termination value at the time of the default. The derivative transactions entered into as part of these agreements are not designated, as per ASC 815, as qualifying hedging relationships, and therefore, they are marked-to-market through earnings each period. As of December 31, 2020 and 2019, there were seven of these risk participation agreements with an aggregate notional amount of $57.4 million and $58.8 million, respectively.
The Bank has also participated out to other financial institutions a pro-rated portion of swaps executed by the Bank. The other financial institution has no obligations under the risk participation agreements unless the borrowers default on their swap transactions with the Bank and the swaps are in liability positions to the borrower. In those instances, the other financial institution has agreed to pay the Bank a portion of the swap’s termination value at the time of the default. The derivative transactions entered into as part of these agreements are not designated, as per ASC 815, as qualifying hedging relationships and are, therefore, marked-to-market through earnings each period. As of December 31, 2020, there were five of these risk participation transactions with a pro-rated notional amount of $30.2 million. As of December 31, 2019, there were four of these risk participation transactions with a pro-rated notional amount of $20.5 million.
The following table presents the effect of the Bank’s derivative financial instruments, not designated as hedging instruments, in the Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018.
Derivatives Not
Designated as Hedging
Instruments		Location of Gain or (Loss)
Recognized in Income
on Derivatives		Amount of Gain or (Loss), Net, Recognized
in Income on Derivatives for Years
Ended December 31,
202020192018
 (In thousands)
Interest rate swapsOther income/(expense)$(844)$6 $(118)
Risk participation agreementsOther income/(expense)(95)(82)158 
Total$(939)$(76)$40