Note 19 - Derivative Financial Instruments

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

19.

Derivative Financial Instruments

At

December

31,

2016

and

2015,

the Company’s derivative financial instruments consist of interest rate swaps. The Company’s interest rate swaps are used for

two

purposes. The

first

purpose is to mitigate the Company’s exposure to rising interest rates on a portion

(

$18.

0

million) of its floating rate junior subordinated debentures that have a contractual value of

$61.9

million at both

December

31,

2016

and

2015.

The

second

purpose is to mitigate the Company’s exposure to rising interest rates on certain fixed rate loans totaling

$235.4

million and

$146.9

million at

December

31,

2016

and

2015,

respectively.

At

December

31,

2016

and

2015,

derivatives with a combined notional amount of

$36.3

million were not designated as hedges. At

December

31,

2016

and

2015,

derivatives with a combined notional amount of

$217.1

million and

$128.5

million, respectively, were designated as fair value hedges. Changes in the fair value of interest rate swaps not designated as hedges are reflected in “Net loss from fair value adjustments” in the Consolidated Statements of Income.

The following table sets forth information regarding the Company’s derivative financial instruments at the periods indicated:

	December 31, 2016					December 31, 2015
	Notional		Net Carrying			Notional		Net Carrying
	Amount		Value (1)			Amount		Value (1)
Interest rate swaps (hedge)	$	182,177	$	6,350		$	28,588	$	48
Interest rate swaps (hedge)		34,916		(658	)		99,955		(1,515	)
Interest rate swaps (non-hedge)		36,321		(2,728	)		36,321		(2,799	)
Total derivatives	$	253,414	$	2,964		$	164,864	$	(4,266	)

(1) Derivatives in a net positive position are recorded as “Other assets” and derivatives in a net negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition. There were no unrealized losses at December 31, 2016 and 2015.

The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for the periods indicated:

	For the year ended
	December 31,
(In thousands)	2016		2015			2014
Financial Derivatives:
Interest rate swaps (non-hedge)		71		(561	)		(3,919	)
Interest rate swaps (hedge)		1,466		(1,036	)		(124	)
Net Gain (loss) (1)	$	1,537	$	(1,597	)	$	(4,043	)

(1) Net gains (losses) are recorded as “Net loss from fair value adjustments” in the Consolidated Statements of Income.

During the years ended

December

31,

2016

and

2015,

the Companny did

not

record any hedge ineffectiveness.

The Company’s interest rate swaps are subject to master netting arrangements and are all with the same counterparty. The Company has not made a policy election to offset its derivative positions.

The following tables present the effect of the master netting arrangements on the presentation of the derivative assets and liabilities in the Consolidated Statements of Condition as of the dates indicated:

	December 31, 2016
							Gross Amounts Not Offset in the Consolidated Statement of Condition
(In thousands)	Gross Amount of Recognized Assets		Gross Amount Offset in the Statement of Condition		Net Amount of Assets Presented in the Statement of Condition		Financial Instruments		Cash Collateral Received		Net Amount
Interest rate swaps	$	6,350	$	-	$	6,350	$	3,386	$	2,964	$	-

							Gross Amounts Not Offset in the Consolidated Statement of Condition
(In thousands)	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Statement of Condition		Net Amount of Liabilities Presented in the Statement of Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
Interest rate swaps	$	3,386	$	-	$	3,386	$	3,386	$	-	$	-

	December 31, 2015
							Gross Amounts Not Offset in the Consolidated Statement of Condition
(In thousands)	Gross Amount of Recognized Assets		Gross Amount Offset in the Statement of Condition		Net Amount of Assets Presented in the Statement of Condition		Financial Instruments		Cash Collateral Received		Net Amount
Interest rate swaps	$	48	$	-	$	48	$	48	$	-	$	-

							Gross Amounts Not Offset in the Consolidated Statement of Condition
(In thousands)	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Statement of Condition		Net Amount of Liabilities Presented in the Statement of Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
Interest rate swaps	$	4,314	$	-	$	4,314	$	48	$	4,266	$	-