Derivatives

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Back-to-Back Swaps

The Company offers interest rate swaps when requested by customers to allow them to hedge the risk of rising interest rates on their variable rate loans. Upon entering into these swaps, the Company enters into offsetting positions with counterparties in order to minimize the interest rate risk. These back-to-back swaps qualify as freestanding financial derivatives with the fair values reported in other assets and other liabilities. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under the arrangements for financial statement presentation purposes. Gains and losses on these back-to-back swaps, which offset, are recorded through noninterest income. No net gains or losses have been recognized to date on these instruments. As of September 30, 2022, the interest rate swaps had an aggregate notional value of $302.8 million, with a fair value of $24.1 million recorded in other assets and other liabilities. As of December 31, 2021, the interest rate swaps had an aggregate notional value of $175.4 million, with a fair value of $8.0 million recorded in other assets and other liabilities. The weighted average maturity was 6.8 years at September 30, 2022 and 6.7 years at December 31, 2021.

Interest Rate Floors Designated as Cash Flow Hedges

The Company has entered into interest rate floor contracts to mitigate exposure to the variability of future cash flows due to changes in interest rates on certain segments of its variable-rate loans. During 2020, the Company entered into two interest rate floor contracts, each with a notional amount of $150.0 million, maturing in October 2023 and November 2023. The Company considers these derivatives to be highly effective at achieving offsetting changes in cash flows attributable to changes in interest rates and has designated them as cash flow hedges. Therefore, changes in the fair value of these derivative instruments are recognized in other comprehensive income. Amortization of the premium paid on cash flow hedges is recognized in earnings over the term of the hedge in the same caption as the hedged item. For the three and nine months ended September 30, 2022, the Company recognized a loss through other comprehensive income of $0.1 million and $0.3 million, respectively, and reclassified $0.1 million and $0.3 million, respectively, out of accumulated other comprehensive income and into interest income. As of September 30, 2022 and December 31, 2021, the interest rate floors had a fair value of $20 thousand and $290 thousand, respectively, recorded in other assets in the consolidated balance sheet. Over the next twelve months, the Company expects to reclassify $0.6 million from accumulated other comprehensive income into interest income related to these agreements.


(In thousands)	Notional Amount		Fair Value		Balance Sheet Category
At September 30, 2022
Back-to-back swaps	$	302,840	$	24,096	Other Assets and Other Liabilities
Interest rate floors	300,000		20		Other Assets

At December 31, 2021
Back-to-back swaps	$	175,392	$	8,022	Other Assets and Other Liabilities
Interest rate floors	300,000		290		Other Assets