Derivatives and Balance Sheet Offsetting

9 Months Ended

Sep. 30, 2015

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivatives and Hedging Activities

Derivatives and Balance Sheet Offsetting

The Company periodically enters into certain commercial loan interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rates. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to a swap agreement. This swap agreement effectively converts the customer’s variable rate loan into a fixed rate. The Company then enters into a corresponding swap agreement with a third-party in order to offset its exposure on the variable and fixed components of the customer agreement. As the interest rate swap agreements with the customers and third parties are not designated as hedges under the Derivatives and Hedging topic of the FASB ASC, the instruments are marked to market in earnings. The notional amount of open interest rate swap agreements at September 30, 2015 and December 31, 2014 was $226.8 million and $215.6 million, respectively. During the three and nine months ended September 30, 2015, a mark-to-market loss of $6 thousand and $2 thousand, respectively was recorded to other noninterest expense. There were no earnings impacts for the three or nine month periods ending September 30, 2014.

The following table presents the fair value of derivatives not designated as hedging instruments at September 30, 2015 and December 31, 2014:

Asset Derivatives

Liability Derivatives

September 30, 2015

December 31, 2014

September 30, 2015

December 31, 2014

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

(in thousands)

Interest rate contracts

Other assets

$

14,548

Other assets

$

11,800

Other liabilities

$

14,602

Other liabilities

$

11,851

The Company is party to interest rate contracts and repurchase agreements that are subject to enforceable master netting arrangements or similar agreements. Under these agreements, the Company may have the right to net settle multiple contracts with the same counterparty. The following tables show the gross interest rate swap agreements and repurchase agreements in the consolidated balance sheets and the respective collateral received or pledged in the form of other financial instruments, which are generally marketable securities. The collateral amounts in these tables are limited to the outstanding balances of the related asset or liability. Therefore, instances of overcollateralization are not shown.

	Gross Amounts of Recognized Assets/Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets/Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
							Collateral Posted			Net Amount
September 30, 2015	(in thousands)
Assets
Interest rate contracts	$	14,548	$	—	$	14,548	$	—		$	14,548
Liabilities
Interest rate contracts	$	14,602	$	—	$	14,602	$	(14,602	)	$	—
Repurchase agreements	$	73,182	$	—	$	73,182	$	(73,182	)	$	—
December 31, 2014
Assets
Interest rate contracts	$	11,800	$	—	$	11,800	$	—		$	11,800
Liabilities
Interest rate contracts	$	11,851	$	—	$	11,851	$	(11,851	)	$	—
Repurchase agreements	$	105,080	$	—	$	105,080	$	(105,080	)	$	—

The following table presents the class of collateral pledged for repurchase agreements as well as the remaining contractual maturity of the repurchase agreements:

	Remaining contractual maturity of the agreements
	Overnight and continuous		Up to 30 days		30 - 90 days		Greater than 90 days		Total
September 30, 2015	(in thousands)
Class of collateral pledged for repurchase agreements
U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations	$	48,182	$	—	$	—	$	25,000	$	73,182
Gross amount of recognized liabilities for repurchase agreements									73,182
Amounts related to agreements not included in offsetting disclosure									$	—

The collateral utilized for the Company’s repurchase agreements is subject to market fluctuations as well as prepayments of principal. The Company monitors the risk of the fair value of its pledged collateral falling below acceptable amounts based on the type of the underlying repurchase agreement. The pledged collateral related to the Company’s term wholesale repurchase agreement, which matures in 2018, is monitored on a monthly basis and additional capital is pledged when necessary. The pledged collateral related to the Company’s sweep repurchase agreements, which mature on a daily basis, is monitored on a daily basis as the underlying sweep accounts can have daily transaction activity and the amount of pledged collateral is adjusted as necessary.