10. DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps Designated as Cash Flow Hedges: During the past three quarters, the Company entered into interest rate swaps. Interest rate swaps with a notional amount of $150.0 million as of June 30, 2015 and $25.0 million as of December 31, 2014, were designated as cash flow hedges of certain interest-bearing demand brokered deposits and were determined to be fully effective during the quarter ended June 30, 2015. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

The following information about the interest rate swaps designated as cash flow hedges as of June 30, 2015 and December 31, 2014 is presented in the following table:

(In thousands)	June 30, 2015			December 31, 2014
Notional amount	$	150,000		$	25,000
Weighted average pay rate		1.66	%		1.81	%
Weighted average receive rate		0.28	%		0.21	%
Weighted average maturity		4.6	years		5.0	years
Unrealized loss	$	(530	)	$	(169	)

Number of contracts		7			1

Interest expense recorded on these swap transactions totaled $376 thousand and $471 thousand for the three and six months ended June 30, 2015, respectively and is reported as a component of interest expense.

Cash Flow Hedges

The following table presents the net gains/(losses) recorded in accumulated other comprehensive income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended June 30, 2015 (after tax):

Amount of

Gain/(Loss)

Recognized in

Recognized

Reclassified

Other Non-Interest

In OCI

From OCI to

Expense

(In thousands)

(Effective Portion)

Interest Expense

(Ineffective Portion)

Interest rate contracts

374

—

Amount of

Gain/(Loss)

Recognized in

Recognized

Reclassified

Other Non-Interest

In OCI

From OCI to

Expense

(In thousands)

(Effective Portion)

Interest Expense

(Ineffective Portion)

Interest rate contracts

(213

)

—

The following tables reflect the cash flow hedges included in the financial statements as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	150,000	$	(530	)
Total included in other liabilities	$	110,000	$	(674	)
Total included in other assets	$	40,000	$	144

	December 31, 2014
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	25,000	$	(169	)
Total included in other liabilities	$	25,000	$	(169	)

Derivatives Not Designated as Accounting Hedges: Beginning in the quarter ended June 30, 2015, the Company offers Facility Specific/Loan Level Swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution / swap counterparty (Loan Level / Back to Back Swap Program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge account (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions.

Information about these swaps is as follows:

(In thousands)	June 30, 2015
Notional amount	$	27,320
Fair value	$	480
Weighted average pay rates		3.06	%
Weighted average receive rates		1.42	%
Weighted average maturity		16.3	years