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Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
 
The Company uses derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities. The Company enters into interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. Additionally, the Company enters into forward contracts for the future delivery of mortgage loans to third-party investors and enters into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

The Company entered into various interest rate swap agreements designated and qualifying as accounting hedges during the reported periods. Designating an interest rate swap as an accounting hedge allows the Company to recognize gains and losses, less any ineffectiveness, in the income statement within the same period that the hedged item affects earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related interest rate swaps. For derivative instruments that are designated and qualify as cash flow hedges, any gains or losses related to changes in fair value are recorded in accumulated other comprehensive loss, net of tax. The fair value of interest rate swaps with a positive fair value are reported in accrued income and other assets in the consolidated balance sheets while interest rate swaps with a negative fair value are reported in accrued expenses and other liabilities in the consolidated balance sheets.

The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected in noninterest income on the consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets in the consolidated balance sheets, while derivative instruments with a negative fair value are reported in accrued expenses and other liabilities in the consolidated balance sheets.

The following table presents amounts that were recorded on the consolidated balance sheets related to cumulative basis adjustments for interest rate swap derivatives designated as fair value accounting hedges as of December 31, 2018 and 2017.

 
 
Carrying amount of the hedged assets
 
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets
Line item in the consolidated balance sheet in which the hedged item is included
 
 
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Loans
 
$
474,233

 
$
91,653

 
$
4,961

 
$
263

Securities available-for-sale1
 
159,188

 
92,230

 
(229
)
 
8

1 These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At December 31, 2018 and 2017, the amounts of the designated hedged items were $88.2 million and $50.0 million, respectively.

 
The following table presents a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company's asset/liability management activities at December 31, 2018 and December 31, 2017, identified by the underlying interest rate-sensitive instruments.

December 31, 2018
 
 
 
Weighted Average Remaining Maturity (years)
 
 
 
Weighted-Average Rate
Instruments Associated With
 
 
 
 
 
 
 
Notional Value
 
 
Fair Value
 
Receive
 
Pay
Loans
 
$
435,926

 
6.5
 
$
(5,025
)
 
3 month LIBOR
 
2.86%
Securities available-for-sale
 
88,200

 
5.1
 
235

 
3 month LIBOR
 
2.54%
           Total swap portfolio at December 31, 2018
 
$
524,126

 
6.3
 
$
(4,790
)
 
3 month LIBOR
 
2.80%


December 31, 2017
 
 
 
Weighted Average Remaining Maturity (years)
 
 
 
Weighted-Average Rate
Instruments Associated With
 
 
 
 
 
 
 
Notional Value
 
 
Fair Value
 
Receive
 
Pay
Loans
 
$
91,135

 
7.9
 
$
(263
)
 
3 month LIBOR
 
2.44%
Securities available-for-sale
 
50,000

 
6.8
 
(8
)
 
3 month LIBOR
 
2.33%
           Total swap portfolio at December 31, 2017
 
$
141,135

 
7.5
 
$
(271
)
 
3 month LIBOR
 
2.41%


The following table presents a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable-rate liabilities used in the Company's asset/liability management activities at December 31, 2018. There were no interest rate swap derivatives designated as cash flow accounting hedges at December 31, 2017.

December 31, 2018
 
 
 
Weighted Average Remaining Maturity (years)
 
 
 
Weighted-Average Rate
Cash Flow Hedges
 
 
 
 
 
 
 
Notional Value
 
 
Fair Value
 
Receive
 
Pay
Interest rate swaps
 
$
110,000

 
8.1
 
$
(2,293
)
 
3 month LIBOR
 
2.88%
Interest rate swaps
 
100,000

 
5.0
 
(2,065
)
 
1 month LIBOR
 
2.88%

 

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of certain assets and liabilities. The Company pledged $7.0 million and $0.7 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at December 31, 2018 and 2017, respectively. Collateral posted and received is dependent on the market valuation of the underlying hedges.

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at December 31, 2018 and 2017.
 
 
December 31, 2018
 
December 31, 2017
 
 
Notional
Amount
 
Fair
Value
 
Notional
Amount
 
Fair
Value
Asset Derivatives
 
 

 
 

 
 

 
 

Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Interest rate swaps associated with loans
 
$
91,135

 
$
986

 
$
17,900

 
$
3

Interest rate swaps associated with securities available-for-sale
 
50,000

 
593

 
—

 
—

Derivatives not designated as hedging instruments
 
 

 
 

 
 

 
 

IRLCs
 
15,136

 
389

 
26,394

 
551

      Total contracts
 
$
156,271

 
$
1,968

 
$
44,294

 
$
554

Liability Derivatives
 
 
 
 
 
 
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Interest rate swaps associated with loans
 
$
344,791

 
$
(6,011
)
 
$
73,235

 
$
(266
)
Interest rate swaps associated with securities available-for-sale
 
38,200

 
(358
)
 
50,000

 
(8
)
Interest rate swaps associated with liabilities
 
$
210,000

 
$
(4,358
)
 
$
—

 
$
—

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Forward contracts
 
$
32,500

 
$
(360
)
 
$
51,124

 
$
(80
)
      Total contracts
 
$
625,491

 
$
(11,087
)
 
$
174,359

 
$
(354
)

  
The fair value of interest rate swaps were estimated using a discounted cash flow method that incorporates current market interest rates as of the balance sheet date. Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and the balance sheet date.

The following table presents the effects of the Company's cash flow hedge relationships on the consolidated statements of comprehensive income during the twelve months ended December 31, 2018, 2017, and 2016.

 
 
Amount of Loss Recognized in Other Comprehensive Income in the Twelve Months Ended
 
 
December 31, 2018
 
December 31, 2017
 
December 31, 2016
Interest rate swap agreements
 
$
(4,358
)
 
$
—

 
$
—
 


The following table summarizes the periodic changes in the fair value of the derivative financial instruments on the consolidated statements of income for the twelve months ended December 31, 2018, 2017, and 2016.
 
 
Amount of (loss) / gain recognized in the twelve months ended
 
 
December 31, 2018
 
December 31, 2017
 
December 31, 2016
Asset Derivatives
 
 

 
 

 
 
Derivatives not designated as hedging instruments
 
 

 
 

 
 

IRLCs
 
(162
)
 
(59
)
 
28

Forward contracts
 
(279
)
 
(519
)
 
408



The following table presents the effects of the Company's interest rate swap agreements on the consolidated statements of income during the twelve months ended December 31, 2018, 2017, and 2016.

Line item in the consolidated statements of income
 
Twelve Months Ended
 
December 31, 2018
 
December 31, 2017
 
December 31, 2016
Interest income
 
 
 
 
 
 
Loans
 
$
(100
)
 
$
—

 
$
—

Securities - taxable
 
(153
)
 
—

 
—

Securities - non-taxable
 
23

 
—

 
—

Total interest income
 
(230
)
 
—

 
—

Interest expense
 
 

 
 

 
 

Deposits
 
151

 
—

 
—

Other borrowed funds
 
177

 
—

 
—

Total interest expense
 
328

 
—

 
—

Net interest income
 
$
(558
)
 
$
—

 
$
—