Derivative Financial Instruments

9 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments. See Note 7 for further information.

The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the balance sheet and do take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

The following table shows the amounts of non-hedging derivative financial instruments.

			Asset derivatives			Liability derivatives
(Dollars in thousands)	Notional or contractual amount		Statement of Financial Condition classification	Fair value		Statement of Financial Condition classification	Fair value
September 30, 2016
Interest rate swap contracts	$	561,646	Other assets	$	15,068	Other liabilities	$	15,354
Loan commitments	11,172		Mortgages held for sale	63		N/A	—
Forward contracts - mortgage loan	27,641		N/A	—		Mortgages held for sale	117
Total	$	600,459		$	15,131		$	15,471
December 31, 2015
Interest rate swap contracts	$	554,083	Other assets	$	9,859	Other liabilities	$	10,044
Loan commitments	12,440		Mortgages held for sale	47		N/A	—
Forward contracts - mortgage loan	16,416		Mortgages held for sale	13		N/A	—
Total	$	582,939		$	9,919		$	10,044

The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments.

		Gain (loss)
		Three Months Ended   September 30,						Nine Months Ended   September 30,
(Dollars in thousands)	Statement of Income classification	2016			2015			2016			2015
Interest rate swap contracts	Other expense	$	36		$	(67	)	$	(100	)	$	(45	)
Interest rate swap contracts	Other income	150			427			464			724
Loan commitments	Mortgage banking	(105		)	(57		)	16			30
Forward contracts - mortgage loan	Mortgage banking	190			(357		)	(130		)	(11		)
Total		$	271		$	(54	)	$	250		$	698

The following table shows the offsetting of financial assets and derivative assets.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
September 30, 2016
Interest rate swaps	$	15,204	$	136	$	15,068	$	—	$	—	$	15,068
December 31, 2015
Interest rate swaps	$	10,016	$	157	$	9,859	$	—	$	—	$	9,859

The following table shows the offsetting of financial liabilities and derivative liabilities.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
September 30, 2016
Interest rate swaps	$	15,490	$	136	$	15,354	$	—	$	15,323	$	31
Repurchase agreements	167,029		—		167,029		167,029		—		—
Total	$	182,519	$	136	$	182,383	$	167,029	$	15,323	$	31
December 31, 2015
Interest rate swaps	$	10,201	$	157	$	10,044	$	—	$	9,833	$	211
Repurchase agreements	130,662		—		130,662		130,662		—		—
Total	$	140,863	$	157	$	140,706	$	130,662	$	9,833	$	211

If a default in performance of any obligation of a repurchase agreement occurs, each party will set-off property held in respect of transactions against obligations owing in respect of any other transactions. At September 30, 2016 and December 31, 2015, repurchase agreements had a remaining contractual maturity of $165.32 million and $128.88 million in overnight, $1.40 million and $1.78 million in up to 30 days and $0.30 million and $0.00 million in greater than 90 days, respectively and were collateralized by U.S. Treasury and Federal agencies securities.