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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

The Corporation periodically uses interest rate swap agreements to modify interest rate characteristics from variable to fixed or fixed to variable in order to reduce the impact of interest rate changes on future net interest income. The Corporation’s credit exposure on interest rate swaps includes fair value and any collateral that is held by a third party.

In 2014, the Corporation entered into an amortizing interest rate swap classified as a cash flow hedge with a notional amount of $20.0 million to hedge a portion of the debt financing of a pool of 10-year fixed rate loans that were originated in 2013 with balances totaling $29.1 million at time of the hedge. A brokered money market demand account with a balance exceeding the amortizing interest rate swap balance is being used for the cash flow hedge. Under the terms of the swap agreement, the Corporation pays a fixed rate of 2.10% and receives a floating rate of one-month LIBOR. The swap matures in November 2022. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and on a recurring basis to determine that the derivative has been and is expected to continue to be highly effective in offsetting changes in cash flows of the hedged item. At September 30, 2021, approximately $228 thousand in net deferred losses, net of tax, recorded in accumulated other comprehensive loss are expected to be reclassified into earnings during the next twelve months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to September 30, 2021. At September 30, 2021, the notional amount of the interest rate swap was $14.8 million and the fair value was a liability of $309 thousand.

The Corporation has an interest rate swap with a current notional amount of $80 thousand, for a 15-year fixed rate loan that is earning interest at 7.43%. The Corporation pays a fixed rate of 7.43% and receives a floating rate based on the one-month LIBOR plus 224 basis points. The swap matures in April 2022. The interest rate swap is carried at fair value in accordance with FASB ASC 815 "Derivatives and Hedging." The loan is carried at fair value under the fair value option as permitted by FASB ASC 825 "Financial Instruments."

Credit Derivatives

The Corporation has agreements with third-party financial institutions whereby the third-party financial institution enters into interest rate derivative contracts with loan customers referred to them by the Corporation. By the terms of the agreements, the third-party financial institution has recourse to the Corporation for any exposure created under each swap contract in the event the customer defaults on the swap agreement and the agreement is in a paying position to the third-party financial institution. These transactions represent credit derivatives and are a customary arrangement that allows the Corporation to provide access to interest rate swap transactions for customers without issuing the swap.

At September 30, 2021, the Corporation reported 123 variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of $762.4 million and remaining maturities ranging from 6 months to 10 years. At September 30, 2021, the fair value of the Corporation's interest rate swap credit derivatives was a liability of $350 thousand. At September 30, 2021, the fair value of the swaps to the customers was a net liability of $18.2 million and these swaps were in paying positions to the third-party financial institution.

The maximum potential payments by the Corporation to the third-party financial institution under these credit derivatives are not estimable as they are contingent on future interest rates and the agreement does not provide for a limitation of the maximum potential payment amount.

Mortgage Banking Derivatives

Derivative loan commitments represent agreements for delayed delivery of financial instruments in which the buyer agrees to purchase and the seller agrees to deliver, at a specified future date, a specified instrument at a specified price or yield. The Corporation’s derivative loan commitments are commitments to sell loans secured by 1-to 4-family residential properties whose predominant risk characteristic is interest rate risk.

Derivatives Tables

The following table presents the notional amounts and fair values of derivatives designated as hedging instruments recorded on the condensed consolidated balance sheets at September 30, 2021 and December 31, 2020. The Corporation
pledges cash or securities to cover the negative fair value of derivative instruments. Cash collateral associated with derivative instruments are not added to or netted against the fair value amounts.
  Derivative AssetsDerivative Liabilities
(Dollars in thousands)Notional
Amount		Balance Sheet
Classification		Fair
Value		Balance Sheet
Classification		Fair
Value
At September 30, 2021
Interest rate swap - cash flow hedge $14,828  $— Other liabilities$309 
Total$14,828 $— $309 
At December 31, 2020
Interest rate swap - cash flow hedge $15,465  $— Other liabilities$533 
Total$15,465 $— $533 
The following table presents the notional amounts and fair values of derivatives not designated as hedging instruments recorded on the condensed consolidated balance sheets at September 30, 2021 and December 31, 2020:
  Derivative AssetsDerivative Liabilities
(Dollars in thousands)Notional
Amount		Balance Sheet
Classification		Fair
Value		Balance Sheet
Classification		Fair
Value
At September 30, 2021
Interest rate swap$80  $— Other liabilities$2 
Credit derivatives762,420  — Other liabilities350 
Interest rate locks with customers55,227 Other assets1,256  — 
Forward loan sale commitments84,320 Other assets167  — 
Total$902,047 $1,423 $352 
At December 31, 2020
Interest rate swap$179 $— Other liabilities$8 
Credit derivatives643,556 — Other liabilities535 
Interest rate locks with customers77,246 Other assets2,894  — 
Forward loan sale commitments112,690  — Other liabilities752 
Total$833,671 $2,894 $1,295 

The following table presents amounts included in the consolidated statements of income for derivatives designated as hedging instruments for the periods indicated:
Statement of Income
Classification		Three Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2021202020212020
Interest rate swap—cash flow hedge—net interest paymentsInterest expense$77 $78 $229 $176 
Total net loss$(77)$(78)$(229)$(176)

The following table presents amounts included in the consolidated statements of income for derivatives not designated as hedging instruments for the periods indicated:
Statement of Income ClassificationThree Months EndedNine Months Ended
September 30,September 30,
(Dollars in thousands)2021202020212020
Credit derivativesOther noninterest income$487 $2,339 $1,866 $4,143 
Interest rate locks with customersNet (loss) gain on mortgage banking activities(406)1,442 (1,637)4,496 
Forward loan sale commitmentsNet gain (loss) on mortgage banking activities434 108 919 (455)
Total net gain$515 $3,889 $1,148 $8,184 
The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at September 30, 2021 and December 31, 2020:
(Dollars in thousands)Accumulated Other
Comprehensive (Loss) Income		At September 30, 2021At December 31, 2020
Interest rate swap—cash flow hedgeFair value, net of taxes$(244)$(421)
Total$(244)$(421)