DERIVATIVES

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

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: Interest rate swaps with a notional amount of $180 million as of March 31, 2017 and December 31, 2016, were designated as cash flow hedges of certain interest-bearing demand brokered deposits and were determined to be fully effective during the three months ended March 31, 2017. As such, no amount of ineffectiveness has been included in net income during the three months ended March 31, 2017. 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 March 31, 2017 and December 31, 2016 is presented in the following table:

(Dollars in thousands)	March 31, 2017			December 31, 2016
Notional amount	$	180,000		$	180,000
Weighted average pay rate		1.64	%		1.64	%
Weighted average receive rate		0.83	%		0.58	%
Weighted average maturity		3.00	years		3.25	years
Unrealized gain/(loss), net	$	121		$	(744	)
Number of contracts		9			9

Net interest expense recorded on these swap transactions totaled $361 thousand and $504 thousand for the three months ended March 31, 2017 and 2016, respectively, and is reported as a component of interest expense.

Cash Flow Hedges

The following table presents the net gains recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended March 31, 2017 (after tax):

					Amount of
	Amount of		Amount of		Gain/(Loss)
	Gain/(Loss)		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	$	512	$	—	$	—

The following table presents the net losses recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three months ended March 31, 2016:

						Amount of
	Amount of			Amount of		Gain/(Loss)
	Gain/(Loss)			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	$	(2,260	)	$	—	$	—

The following tables reflect the cash flow hedges included in the financial statements as of March 31, 2017 and December 31, 2016:

	March 31, 2017
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	121
Total included in other assets	$	85,000	$	348
Total included in other liabilities	$	95,000	$	(227	)

	December 31, 2016
	Notional		Fair
(In thousands)	Amount		Value
Interest rate swaps related to interest-bearing
demand brokered deposits	$	180,000	$	(744	)
Total included in other assets	$	30,000	$	123
Total included in other liabilities	$	150,000	$	(867	)

Derivatives Not Designated as Accounting Hedges: 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 accounting (“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:

(Dollars in thousands)	March 31, 2017			December 31, 2016
Notional amount	$	155,853		$	126,810
Fair value	$	2,869		$	1,543
Weighted average pay rates		3.88	%		3.75	%
Weighted average receive rates		2.83	%		2.65	%
Weighted average maturity		9.1	years		9.4	years
Number of contracts		19			14