2021 Annual Report

Cash Flow Hedging Derivatives For derivative instruments that are designated and qualify as a cash flow hedge, the aggregate fair value of the derivative instrument is recorded in other assets or other liabilities with any gain or loss related to changes in fair value recorded in accumulated other comprehensive income, net of tax. The gain or loss is reclassified into earnings in the same period during which the hedged asset or liability affects earnings and is presented in the same income statement line item as the earnings effect of the hedged asset or liability. The Company utilizes cash flow hedges to manage interest rate exposure for the brokered deposit and wholesale borrowing portfolios. During the next 12 months, the Company estimates that $1.3 million will be reclassified to interest expense. The following table presents a summary of the Company’s interest rate swaps designated as cash flow hedges as of December 31, 2021 and 2020: $ (3,410) During 2020 and 2021, the Company purchased interest rate caps, designated as cash flow hedges, of certain deposit liabilities. The interest rate caps require receipt of variable amounts from the counterparties when interest rates rise above the strike price in the contracts. For the years ended December 31, 2021 and 2020, the Company recognized amortization expense on the interest rate caps of $362,000 and $41,000, respectively, and was recorded as a component of interest expense on brokered deposits The following table presents a summary of the Company’s interest rate caps designated as cash flow hedges as of December 31, 2021 and 2020: Notional Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,000 Initial Premium Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,614 Weighted Average Strike Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Maturity (Years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.72 The following table presents a summary of the Company’s interest rate contracts as of December 31, 2021 and 2020: $ 50,000 2,689 0.90 % 8.84 (dollars in thousands) 2021 2020 (dollars in thousands) 2021 2020 Notional Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Pay Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Receive Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Maturity (Years) . . . . . . . . . . . . . . . . . . . . . . . . Net Unrealized Gain (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 125,000 $ 111,000 1.27 % 0.14 % 1.26 % 0.22 % 3.76 791 3.95

0.75 %

December 31, 2021

December 31, 2020

Estimated Fair Value

Estimated Fair Value

Notional Amount

Notional Amount

(dollars in thousands)

Interest rate swap agreements: Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest rate cap agreements: Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 90,000 $ 1,717 $ 5,000 $

56

35,000

(926) 106,000 (3,466)

110,000 7,356 50,000 2,834 The Company is party to collateral support agreements with certain derivative counterparties. These agreements require that the Company maintain collateral based on the fair values of derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral. As of December 31, 2021 and 2020, the Company pledged cash collateral for the Company’s derivative contracts of $370,000 and $8.5 million, respectively. In addition, as

111

Made with FlippingBook Ebook Creator