Quarterly report pursuant to Section 13 or 15(d)

Derivatives and Hedging Activities

v3.21.2
Derivatives and Hedging Activities
6 Months Ended
Jun. 30, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities

Note 15 — Derivatives and Hedging Activities

 

The Company’s derivative financial instruments consist entirely of interest rate swap agreements between the Company and its customers and other third party counterparties. The Company enters into “back-to-back swap” arrangements whereby the Company executes interest rate swap agreements with its customers and acquires an offsetting swap position from a third party counterparty. These derivative financial statements are accounted for at fair value, with changes in fair value recognized in the Company’s Consolidated Statements of Income.

The table below presents the fair value of the Company’s derivative financial instruments as well as their location on the Balance Sheet as of June 30, 2021 and December 31, 2020.

 

As of June 30, 2021

 

Derivative Assets

 

 

Derivative Liabilities

 

 

 

Notional Amount

 

 

Balance Sheet Location

 

Fair Value

 

 

Notional Amount

 

 

Balance Sheet Location

 

Fair Value

 

 

 

(in thousands)

 

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

$

66,615

 

 

Other Assets

 

$

586

 

 

$

66,615

 

 

Other Liabilities

 

$

562

 

Total derivatives not designated as hedging instruments

 

 

 

 

 

 

 

$

586

 

 

 

 

 

 

 

 

$

562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2020

 

Derivative Assets

 

 

Derivative Liabilities

 

 

 

Notional Amount

 

 

Balance Sheet Location

 

Fair Value

 

 

Notional Amount

 

 

Balance Sheet Location

 

Fair Value

 

 

 

(in thousands)

 

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

$

66,904

 

 

Other Assets

 

$

1,088

 

 

$

66,904

 

 

Other Liabilities

 

$

1,149

 

Total derivatives not designated as hedging instruments

 

 

 

 

 

 

 

$

1,088

 

 

 

 

 

 

 

 

$

1,149

 

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Income Statement for the three and six months ended June 30, 2021 and 2020.

 

Derivatives Not Designated as Hedging Instruments under Subtopic 815-20

 

Location of Gain or (Loss) Recognized in Income on Derivative

 

Amount of Gain or (Loss) Recognized in Income on Derivative

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

(in thousands)

 

Interest rate products

 

Other income

 

$

(64

)

 

$

(98

)

 

$

85

 

 

$

(98

)

Total

 

 

 

$

(64

)

 

$

(98

)

 

$

85

 

 

$

(98

)

The Company did not recognize any fee income from its derivative financial instruments for the three and six months ended June 30, 2021. Fee income recognized from the Company's derivative financial instruments for the three and six months ended June 30, 2020 was $512,000.

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of June 30, 2021 and December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The derivative assets are located within the prepaid and other assets line item on the Consolidated Balance Sheets and the derivative liabilities are located within the accrued expenses and other liabilities line item on the Consolidated Balance Sheets.

 

Offsetting of Derivative Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the Consolidated Balance Sheets

 

 

 

Gross Amounts of Recognized Assets

 

 

Gross Amounts Offset in the Consolidated Balance Sheets

 

 

Net Amounts of Assets presented in the Consolidated Balance Sheets

 

 

Financial Instruments

 

 

Cash Collateral Received

 

 

Net Amount

 

 

 

(in thousands)

 

Derivatives

 

$

586

 

 

$

 

 

$

586

 

 

$

562

 

 

$

24

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Offsetting of Derivative Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the Consolidated Balance Sheets

 

 

 

Gross Amounts of Recognized Liabilities

 

 

Gross Amounts Offset in the Consolidated Balance Sheets

 

 

Net Amounts of Liabilities presented in the Consolidated Balance Sheets

 

 

Financial Instruments

 

 

Cash Collateral Provided

 

 

Net Amount

 

 

 

(in thousands)

 

Derivatives

 

$

562

 

 

$

 

 

$

562

 

 

$

562

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Offsetting of Derivative Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the Consolidated Balance Sheets

 

 

 

Gross Amounts of Recognized Assets

 

 

Gross Amounts Offset in the Consolidated Balance Sheets

 

 

Net Amounts of Assets presented in the Consolidated Balance Sheets

 

 

Financial Instruments

 

 

Cash Collateral Received

 

 

Net Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

 

$

1,088

 

 

$

 

 

$

1,088

 

 

$

1,088

 

 

$

 

 

$

1,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Offsetting of Derivative Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the Consolidated Balance Sheets

 

 

 

Gross Amounts of Recognized Liabilities

 

 

Gross Amounts Offset in the Consolidated Balance Sheets

 

 

Net Amounts of Liabilities presented in the Consolidated Balance Sheets

 

 

Financial Instruments

 

 

Cash Collateral Provided

 

 

Net Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

 

$

1,149

 

 

$

 

 

$

1,149

 

 

$

 

 

$

1,150

 

 

$

(1

)

 

 

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. In addition, these agreements may also require the Company to post additional collateral should it fail to maintain its status as a well- or adequately- capitalized institution.

 

As of June 30, 2021 and December 31, 2020, the fair value of derivatives in a net asset position for counterparty transactions, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $586,000 and $1.1 million, respectively. As of June 30, 2021, the Company had received $530,000 of collateral from its counterparties related to these agreements and is adequately collateralized since its net asset position was $24,000 ($586,000 fair value of assets less $562,000 fair value of liabilities) as of June 30, 2021. As of December 31, 2020, the Company had posted $1.2 million of collateral related to these agreements and was essentially over-collateralized since its net liability position was $61,000 ($1.1 million fair value of assets less $1.1 million fair value of liabilities). If the Company had breached any of the provisions described above at June 30, 2021 or December 31, 2020, it could have been required to settle its obligations under the agreements at their termination value of $0 and $1.1 million, respectively.