Derivative Instruments

The Company enters into derivative transactions principally to protect against the risk of adverse price or interest rate movements on the value of certain assets and liabilities on future cash flows. As of March 31, 2018 and December 31, 2017, the Company has derivative financial instruments not included in hedge relationships. These derivatives consist of interest rate swaps and floors used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies. For the majority of these instruments the Company acts as an intermediary for its customers. Changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company's results of operations. The Company also has an interest rate swap that serves as a fair value hedge for changes in long term fixed interest rates related to commercial real estate loans. Hedge ineffectiveness is assessed quarterly and any ineffectiveness is recorded as non-interest expense. For the three months ended March 31, 2018 and 2017, hedge ineffectiveness was less than $0.1 million and the change in fair value was less than $0.1 million, for each respective period.

The following table summarizes the notional and fair value of these derivative instruments (in thousands):



	March 31, 2018				December 31, 2017
	Notional Amount		Fair Value		Notional Amount		Fair Value

Non-hedging interest rate derivatives:
Customer counterparties:
Loan interest rate swap - assets	$	86,856	$	2,039	$	225,480	$	4,877
Loan interest rate swap - liabilities	426,241		19,452		314,450		9,513
Financial institution counterparties:
Loan interest rate swap - assets	432,755		19,620		320,949		9,591
Loan interest rate swap - liabilities	86,856		2,039		218,924		4,877

Derivatives designated as hedges of fair value:
Financial institution counterparties:
Loan interest rate swap - assets	3,961		93		4,326		34

The following table summarizes the change in fair value of these derivative instruments (in thousands):



	Three months ended March 31,
	2018		2017
Change in fair value non-hedging interest rate derivatives:
Other expense	$	90	$	45

Change in fair value hedging interest rate derivatives:
Other expense	1		(4		)

Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements. The Company's derivative transactions with financial institution counterparties are generally executed under International Swaps and Derivative Association ("ISDA") master agreements which include "right of setoff" 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 Company does not generally offset financial instruments for financial reporting purposes. Information about financial instruments that are eligible for offset in the consolidated balance sheet as of March 31, 2018 is presented in the following tables (in thousands):



							Gross Amounts
							Not Offset in the
							Balance Sheet
											Total
											of Gross
											Amounts
											Not Offset in
											the Statement
											of Financial
											Position
							Netting				Including
			Gross		Net Amounts		Adjustment				Applicable
			Amounts		of Assets		per				Netting
	Gross		Offset in the		Presented in		Applicable				Agreement
	Amounts of		Statement of		the Statement		Master		Fair Value		and Fair
	Recognized		Financial		of Financial		Netting		of Financial		Value of
Description	Assets		Position		Position		Arrangements		Collateral		Collateral		Net Amount
	(a)		(b)		(c)=(a)-(b)						(d)		(c)-(d) *
Non-hedging derivative assets:
Interest rate swap agreements - customer counterparties	$	2,039	$	—	$	2,039	$	—	$	2,039	$	2,039	$	—
Interest rate swap agreements - financial institution counterparties	$	19,620	$	—	$	19,620	$	—	$	—	$	—	$	19,620

Hedging derivative assets:
Interest rate swap agreements - financial institution counterparties	$	93	$	—	$	93	$	—	$	70	$	70	$	23



Non-hedging derivative liabilities:
Interest rate swap agreements - customer counterparties	$	19,452	$	—	$	19,452	$	—	$	19,452	$	19,452	$	—
Interest rate swap agreements - financial institution counterparties	$	2,039	$	—	$	2,039	$	—	$	14,671	$	14,671	$	—

*	For instances where the fair value of financial collateral meets or exceeds the amounts presented in the Consolidated Balance Sheets, no value is displayed to represent full collateralization.