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 18 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 Statement of Financial Condition and do not 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 institution 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 at December 31, 2017 and 2016.



			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
Interest rate swap contracts	$	756,550	Other assets	$	5,167	Other liabilities	$	5,262
Loan commitments	8,504		Mortgages held for sale	66		N/A	—
Forward contracts - mortgage loan	19,390		N/A	—		Mortgages held for sale	10
Total - December 31, 2017	$	784,444		$	5,233		$	5,272

Interest rate swap contracts	$	570,004	Other assets	$	6,621	Other liabilities	$	6,743
Loan commitments	5,527		Mortgages held for sale	43		N/A	—
Forward contracts - mortgage loan	16,525		Mortgages held for sale	222		N/A	—
Total - December 31, 2016	$	592,056		$	6,886		$	6,743

The following table shows the amounts included in the Statements of Income for non-hedging derivative financial instruments at December 31, 2017, 2016 and 2015.



		Gain (loss)
(Dollars in thousands)	Statement of Income classification	2017			2016			2015
Interest rate swap contracts	Other expense	$	26		$	64		$	(8	)
Interest rate swap contracts	Other income	1,585			730			1,045
Loan commitments	Mortgage banking	23			(4		)	45
Forward contracts - mortgage loan	Mortgage banking	(232		)	209			155
Total		$	1,402		$	999		$	1,237

The following table shows the offsetting of financial assets and derivative assets at December 31, 2017 and 2016.



							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
December 31, 2017
Interest rate swaps	$	5,194	$	27	$	5,167	$	—	$	—	$	5,167

December 31, 2016
Interest rate swaps	$	6,681	$	60	$	6,621	$	—	$	—	$	6,621

The following table shows the offsetting of financial liabilities and derivative liabilities at December 31, 2017 and 2016.



							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
December 31, 2017
Interest rate swaps	$	5,289	$	27	$	5,262	$	—	$	2,705	$	2,557
Repurchase agreements	149,835		—		149,835		149,835		—		—
Total	$	155,124	$	27	$	155,097	$	149,835	$	2,705	$	2,557

December 31, 2016
Interest rate swaps	$	6,803	$	60	$	6,743	$	—	$	3,794	$	2,949
Repurchase agreements	162,913		—		162,913		162,913		—		—
Total	$	169,716	$	60	$	169,656	$	162,913	$	3,794	$	2,949

If a default in performance of any obligation of a repurchase or derivative agreement occurs, each party will set-off property held, or loan indebtedness owing, in respect of transactions against obligations owing in respect of any other transactions. At December 31, 2017 and December 31, 2016, repurchase agreements had a remaining contractual maturity of $148.22 million and $160.38 million in overnight, $1.32 million and $2.23 million in up to 30 days and $0.30 million and $0.30 million in greater than 90 days, respectively and were collateralized by U.S. Treasury and Federal agencies securities.