DERIVATIVE INSTRUMENTS AND OFFSETTING ASSETS AND LIABILITIES

3 Months Ended

Mar. 31, 2015

DERIVATIVE INSTRUMENTS [Abstract]

DERIVATIVE INSTRUMENTS

NOTE 13 – DERIVATIVE INSTRUMENTS AND OFFSETTING ASSETS AND LIABILITIES

The derivatives held by the Company include commitments to fund fixed-rate mortgage loans to customers and forward commitments to sell individual fixed-rate mortgage loans.  The Company’s objective in obtaining the forward commitments is to mitigate the interest rate risk associated with the commitments to fund the fixed-rate mortgage loans.  Both the commitments to fund fixed-rate mortgage loans and the forward commitments to sell individual fixed-rate mortgage loans are reported at fair value, with adjustments being recorded in current period earnings, and are not accounted for as hedges.  At March 31, 2015, the notional amount of forward commitments to sell individual fixed-rate mortgage loans was $256.8million with a carrying value and fair value reflecting a loss of $1.5 million.  At March 31, 2014, the notional amount of forward commitments to sell individual fixed-rate mortgage loans was $90.9 million with a carrying value and fair value reflecting a loss of approximately $159,000.  At March 31, 2015, the notional amount of commitments to fund individual fixed-rate mortgage loans was $174.8 million with a carrying value and fair value reflecting a gain of $5.2 million.  At March 31, 2014, the notional amount of commitments to fund individual fixed-rate mortgage loans was $79.9 million with a carrying value and fair value reflecting a gain of $1.2million. 

The Company also enters into derivative financial instruments in the form of interest rate swaps to meet the financing, interest rate and equity risk management needs of its customers.  Upon entering into these interest rate swaps to meet customer needs, the Company enters into offsetting positions to minimize interest rate and equity risk to the Company.  These derivative financial instruments are reported at fair value with any resulting gain or loss recorded in current period earnings.  These instruments and their offsetting positions are recorded in other assets and other liabilities on the consolidated balance sheets.  As of March 31, 2015, the notional amount of customer related derivative financial instruments was $309.1 million with an average maturity of 46 months, an average interest receive rate of 2.5% and an average interest pay rate of 5.6%.  As of March 31, 2014, the notional amount of customer related derivative financial instruments was $382.4 million with an average maturity of 54 months, an average interest receive rate of 2.5% and an average interest pay rate of 5.6%.

Certain financial instruments such as derivatives, may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements or similar agreements. The Bank’s derivative transactions with upstream financial institution counterparties are generally executed under International Swaps and Derivative Association  master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis.  Nonetheless, the Bank does not generally offset such financial instruments for financial reporting purposes.

The following tables present components of financial instruments eligible for offsetting for the periods indicated:

	March 31, 2015
				Gross Amounts Not Offset
				in the Consolidated
				Balance Sheet
					Financial
	Gross Amount	Gross Amount	Net Amount	Financial	Collateral	Net
	Recognized	Offset	Recognized	Instruments	Pledged	Amount
	(In thousands)
Financial assets:
Derivatives:
Forward commitments	$                5,319	$                      -	$               5,319	$                  -	$                  -	$          5,319
Loan/lease interest rate swaps	22,178	-	22,178	-	-	22,178
Total financial assets	$              27,497	$                      -	$             27,497	$                  -	$                  -	$        27,497
Financial liabilities:
Derivatives:
Forward commitments	$                1,546	$                      -	$               1,546	$                  -	$                  -	$          1,546
Loan/lease interest rate swaps	22,178	-	22,178	-	(22,178)	-
Repurchase arrangements	384,829	-	384,829	(384,829)	-	-
Total financial liabilities	$            408,553	$                      -	$           408,553	$     (384,829)	$       (22,178)	$          1,546

	December 31, 2014
				Gross Amounts Not Offset
				in the Consolidated
				Balance Sheet
					Financial
	Gross Amount	Gross Amount	Net Amount	Financial	Collateral	Net
	Recognized	Offset	Recognized	Instruments	Pledged	Amount
	(In thousands)
Financial assets:
Derivatives:
Forward commitments	$                2,177	$                      -	$               2,177	$                  -	$                  -	$          2,177
Loan/lease interest rate swaps	22,004	-	22,004	-	-	22,004
Total financial assets	$              24,181	$                      -	$             24,181	$                  -	$                  -	$        24,181
Financial liabilities:
Derivatives:
Forward commitments	$                1,203	$                      -	$               1,203	$                  -	$                  -	$          1,203
Loan/lease interest rate swaps	22,004	-	22,004	-	(22,004)	-
Repurchase arrangements	388,166	-	388,166	(388,166)	-	-
Total financial liabilities	$            411,373	$                      -	$           411,373	$     (388,166)	$       (22,004)	$          1,203

	March 31, 2014
				Gross Amounts Not Offset
				in the Consolidated
				Balance Sheet
					Financial
	Gross Amount	Gross Amount	Net Amount	Financial	Collateral	Net
	Recognized	Offset	Recognized	Instruments	Pledged	Amount
	(In thousands)
Financial assets:
Derivatives:
Forward commitments	$                1,194	$                      -	$               1,194	$                  -	$                  -	$          1,194
Loan/lease interest rate swaps	27,081	-	27,081	-	-	27,081
Total financial assets	$              28,275	$                      -	$             28,275	$                  -	$                  -	$        28,275
Financial liabilities:
Derivatives:
Forward commitments	$                   163	$                      -	$                  163	$                  -	$                  -	$             163
Loan/lease interest rate swaps	27,081	-	27,081	-	(27,081)	-
Repurchase arrangements	456,303	-	456,303	(456,303)	-	-
Total financial liabilities	$            483,547	$                      -	$           483,547	$     (456,303)	$       (27,081)	$             163