Derivatives and Hedging Activities

9 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

The Company may use interest-rate contracts (swaps, caps, and floors) as part of its interest-rate risk management strategy. These agreements are entered into as hedges against future interest-rate fluctuations on specifically identified assets or liabilities. The Company did not have derivative fair value hedges or derivative cash flow hedges at September 30, 2016 or December 31, 2015, respectively.

Derivatives not designated as hedges are not speculative but rather, result from a service the Company provides to certain commercial banking customers for a fee. The Company executes interest-rate swaps with certain commercial banking customers to aid them in managing their interest-rate risk. These contracts allow the commercial banking customers to convert floating-rate loan payments to fixed-rate loan payments. The credit risks associated with the interest-rate swaps entered into with our commercial banking customers are consistent with those involved in extending loans. These transactions are subject to the Company's credit policy including collateral requirements consistent with the Company's assessment of the customers' credit quality.

The Company concurrently enters into offsetting swaps with a third-party financial institution, effectively minimizing its net risk exposure resulting from such transactions. The third-party financial institution exchanges the customer’s fixed-rate loan payments for floating-rate loan payments.

As the interest-rate swaps associated with this program do not meet hedge accounting requirements and the requirement of the underlying collateral of the customer swaps, the fair value of the customer swaps and the offsetting swaps are not materially different and do not significantly impact the Company’s results of operations. The Company had 107 interest-rate swaps related to this program with an aggregate notional amount of $747.2 million at September 30, 2016, compared with 64 interest-rate swaps with an aggregate notional amount of $490.6 million at December 31, 2015.

Asset derivatives and liability derivatives are included in other assets and accrued expenses and other liabilities on the unaudited consolidated balance sheets, respectively. The table below presents the fair value and classification of the Company’s derivative financial instruments at September 30, 2016 and December 31, 2015.

	At September 30, 2016				At December 31, 2015
	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
	(In Thousands)
Total derivatives (interest-rate products) not designated as hedging instruments	$	24,790	$	24,790	$	8,656	$	8,781

Certain derivative agreements contain provisions that require the Company to pledge collateral (in the form of financial instruments and/or cash) if the derivative exposure exceeds a threshold amount. The Company had pledged collateral of $37.3 million and $14.7 million in the normal course of business at September 30, 2016 and December 31, 2015, respectively.

The tables below present the offsetting of derivatives and amounts subject to master netting agreements not offset in the unaudited consolidated balance sheet at the dates indicated.

	At September 30, 2016
	Gross Amounts of Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
							Financial Instruments Pledged		Cash Collateral Pledged
	(In Thousands)
Asset Derivatives	$	24,790	$	—	$	24,790	$	—	$	—	$	24,790
Liability Derivatives	$	24,790	$	—	$	24,790	$	36,629	$	720	$	—

	At December 31, 2015
	Gross Amounts of Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
							Financial Instruments Pledged		Cash Collateral Pledged
	(In Thousands)
Asset Derivatives	$	8,656	$	—	$	8,656	$	—	$	—	$	8,656
Liability Derivatives	$	8,781	$	—	$	8,781	$	9,873	$	4,790	$	—

The Company has agreements with certain of its derivative counterparties that contain credit-risk-related contingent provisions. These provisions provide the counterparty with the right to terminate its derivative positions and require the Company to settle its obligations under the agreements if the Company defaults on certain of its indebtedness or if the Company fails to maintain its status as a well-capitalized institution.