DERIVATIVES AND HEDGING ACTIVITIES

6 Months Ended

Jun. 30, 2017

DERIVATIVES AND HEDGING ACTIVITIES [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

10.   DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three-month and six-month periods ended June 30, 2017 and 2016, such derivatives were used to hedge the variability in cash flows associated with wholesale borrowings, i.e., FHLBNY advances.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company did not record any hedge ineffectiveness during the three-month or six-month periods ended June 30, 2017 or 2016.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are paid on the Company’s liabilities.  During the next twelve months the Company estimates that $52 will be reclassified as an increase to interest expense.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition:

	At June 30, 2017										At December 31, 2016
	Count		Notional Amount			Fair Value Assets		Fair Value Liabilities			Count		Notional Amount			Fair Value Assets		Fair Value Liabilities
Included in other assets/(liabilities):
Interest rate swaps related to FHLBNY advances		7	$	135,000		$	2,898	$	(87	)		4	$	90,000		$	3,228	$	-
Weighted average pay rates				1.46	%									1.24	%
Weighted average receive rates				1.22	%									0.95	%
Weighted average maturity			4.79 years										5.32 years

The table below presents the effect of the Company’s derivative financial instruments as the amount of gain or (loss) on the Consolidated Statements of Income for the periods indicated:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
Interest rate products
Effective portion:
Amount of gain (loss) recognized in other comprehensive income	$	(825	)	$	(998	)	$	(597	)	$	(998	)
Amount of gain or (loss) reclassified from other comprehensive income into interest expense		(92	)		(41	)		(179	)		(41	)
Ineffective Portion:
Amount of gain or (loss) recognized in other  non-interest expense		-			-			-			-

The Company’s agreements with each of its derivative counterparties state that if the Company defaults on any of its indebtedness, it could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty.

The Company’s agreements with certain of its derivative counterparties state that if the Bank fails to maintain its status as a well-capitalized institution, the Bank could be required to terminate its derivative positions with the counterparty.

As of June 30, 2017, the termination value of derivatives in a net asset position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $2,791. If the Company had breached any of the above provisions at June 30, 2017, it could have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty. There were no provisions breached for the period ended June 30, 2017.