Derivative Financial Instruments

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments. See Note 8 for further information.

The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Consolidated Statements of Financial Condition and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees 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 the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

The following table shows the amounts of non-hedging derivative financial instruments.

			Asset derivatives			Liability derivatives
(Dollars in thousands)	Notional or contractual amount		Statement of Financial Condition classification	Fair value		Statement of Financial Condition classification	Fair value
June 30, 2022
Interest rate swap contracts	$	990,000	Other assets	$	13,432	Other liabilities	$	13,686
Loan commitments	6,304		Mortgages held for sale	225		N/A	—
Forward contracts - mortgage loan	7,250		N/A	—		Mortgages held for sale	1
Total	$	1,003,554		$	13,657		$	13,687
December 31, 2021
Interest rate swap contracts	$	1,064,721	Other assets	$	20,735	Other liabilities	$	21,172
Loan commitments	15,086		Mortgages held for sale	452		N/A	—
Forward contracts - mortgage loan	22,000		N/A	—		Mortgages held for sale	11
Total	$	1,101,807		$	21,187		$	21,183

The following table shows the amounts included in the Consolidated Statements of Income for non-hedging derivative financial instruments.

		Gain (loss)
		Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	Statement of Income classification	2022		2021		2022		2021
Interest rate swap contracts	Other expense	$	(54)	$	(14)	$	183	$	319
Interest rate swap contracts	Other income	—		152		—		238
Loan commitments	Mortgage banking	(62)		69		(227)		(629)
Forward contracts - mortgage loan	Mortgage banking	(201)		(311)		10		266
Total		$	(317)	$	(104)	$	(34)	$	194

The following table shows the offsetting of financial assets and derivative assets.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
June 30, 2022
Interest rate swaps	$	13,432	$	—	$	13,432	$	—	$	15,795	$	(2,363)
December 31, 2021
Interest rate swaps	$	24,436	$	3,701	$	20,735	$	—	$	—	$	20,735

The following table shows the offsetting of financial liabilities and derivative liabilities.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
June 30, 2022
Interest rate swaps	$	13,686	$	—	$	13,686	$	—	$	—	$	13,686
Repurchase agreements	162,650		—		162,650		162,650		—		—
Total	$	176,336	$	—	$	176,336	$	162,650	$	—	$	13,686
December 31, 2021
Interest rate swaps	$	24,873	$	3,701	$	21,172	$	20,498	$	—	$	674
Repurchase agreements	194,727		—		194,727		194,727		—		—
Total	$	219,600	$	3,701	$	215,899	$	215,225	$	—	$	674

If a default in performance of any obligation of a repurchase agreement occurs, each party will set-off property held in respect of transactions against obligations owing in respect of any other transactions. At June 30, 2022 and December 31, 2021, repurchase agreements had a remaining contractual maturity of $159.48 million and $191.47 million in overnight and $3.17 million and $3.26 million in up to 30 days, respectively and were collateralized by U.S. Treasury and Federal agencies securities.