DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

6 Months Ended

Jun. 30, 2014

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Schedule of derivative assets and liabilities

Information about derivative assets and liabilities at June 30, 2014, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Forward-starting interest rate swaps on FHLBB borrowings	$	300,000	4.8	0.00	%	2.29	%	$	(1,022	)
Total cash flow hedges	300,000							(1,022		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	12,827		15.4	0.52	%	5.09	%	(2,322		)
Interest rate swaps on loans with commercial loan customers	252,874		5.9	2.34	%	4.58	%	(9,193		)
Reverse interest rate swaps on loans with commercial loan customers	252,874		5.9	4.58	%	2.34	%	9,222
Forward sale commitments	52,922		0.2					(561		)
Total economic hedges	571,497							(2,854		)
Non-hedging derivatives:
Interest rate lock commitments	40,391		0.2					660
Total non-hedging derivatives	40,391							660
Total	$	911,888						$	(3,216	)

Information about derivative assets and liabilities at December 31, 2013, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Interest rate swaps on FHLBB borrowings	$	150,000	2.5	0.25	%	2.61	%	$	(3,102	)
Forward-starting interest rate swaps on FHLBB borrowings	260,000		4.5	—		1.88	%	1,015
Interest rate swaps on junior subordinated notes	15,000		0.4	2.09	%	5.54	%	(203		)
Total cash flow hedges	425,000							(2,290		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	13,095		15.9	0.54	%	5.09	%	(1,889		)
Interest rate swaps on loans with commercial loan customers	206,933		5.4	2.44	%	4.68	%	(6,278		)
Reverse interest rate swaps on loans with commercial loan customers	206,933		5.4	4.68	%	2.44	%	6,286
Forward sale commitments	32,911		0.2					261
Total economic hedges	459,872							(1,620		)
Non-hedging derivatives:
Interest rate lock commitments	20,199		0.2					258
Total non-hedging derivatives	20,199							258
Total	$	905,071						$	(3,652	)

Schedule of amounts included in the consolidated statements of income and in the other comprehensive income section of the consolidated statements of comprehensive income (related to interest rate derivatives designated as hedges of cash flows),

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2014			2013			2014			2013
Interest rate swaps on FHLBB borrowings:
Unrealized (loss) gain recognized in accumulated other comprehensive loss	$	(3,343	)	$	5,131		$	(4,127	)	$	5,437
Reclassification of unrealized (loss) gain from accumulated other comprehensive loss to interest expense	—			899			—			1,910
Reclassification of unrealized loss from accumulated other comprehensive loss to other non-interest income for termination of swaps	—			236			8,630			472
Reclassification of unrealized deferred tax benefit from accumulated other comprehensive loss to tax expense for terminated swaps	—			(95		)	(3,611		)	(303		)
Net tax benefit (expense) on items recognized in accumulated other comprehensive loss	1,352			(2,433		)	1,666			(2,955		)
Interest rate swaps on junior subordinated debentures:
Unrealized loss recognized in accumulated other comprehensive loss	—			(4		)	(1		)	(5		)
Reclassification of unrealized loss from accumulated other comprehensive loss to interest expense	75			129			204			256
Net tax expense on items recognized in accumulated other comprehensive loss	(29		)	(48		)	(80		)	(102		)
Other comprehensive income recorded in accumulated other comprehensive loss, net of reclassification adjustments and tax effects	$	(1,945	)	$	3,815		$	2,681		$	4,710
Net interest expense recognized in interest expense on hedged FHLBB borrowings	$	—		$	1,076		$	—		$	2,319
Net interest expense recognized in interest expense on junior subordinated notes	$	75		$	129		$	204		$	256

Schedule of amounts included in the consolidated statements of income related to economic hedges and non-hedging derivatives

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2014			2013			2014			2013
Economic hedges
Interest rate swap on industrial revenue bond:
Unrealized (loss) gain recognized in other non-interest income	$	(350	)	$	665		$	(731	)	$	772
Interest rate swaps on loans with commercial loan customers:
Unrealized gain recognized in other non-interest income	(1,919		)	4,996			(1,732		)	6,550
Reverse interest rate swaps on loans with commercial loan customers:
Unrealized loss recognized in other non-interest income	1,919			(4,996		)	1,732			(6,550		)
Favorable change in credit valuation adjustment recognized in other non-interest income	4			259			11			337
Forward Commitments:
Unrealized loss recognized in other non-interest income	(561		)	4,913			(669		)	4,363
Realized loss in other non-interest income	(177		)	517			(341		)	1,572
Non-hedging derivatives
Interest rate lock commitments
Unrealized gain recognized in other non-interest income	660			(1,507		)	1,037			1,251
Realized gain in other non-interest income	$	769		$	2,758		$	1,035		$	3,998

Schedule of assets subject to an enforceable master netting arrangement

Offsetting of Financial Assets and Derivative Assets

						Net Amounts
	Gross		Gross Amounts			of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the			Presented in the		the Statements of Condition
	Recognized		Statements of			Statements of		Financial		Cash
(in thousands)	Assets		Condition			Condition		Instruments		Collateral Received		Net Amount
As of June 30, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	—	$	—		$	—	$	—	$	—	$	—
Commercial counterparties	9,368		(2		)	9,366		—		—		9,366
Total	$	9,368	$	(2	)	$	9,366	$	—	$	—	$	9,366

Offsetting of Financial Assets and Derivative Assets

					Net Amounts
	Gross		Gross Amounts		of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the		Presented in the		the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(in thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
As of December 31, 2013
Interest Rate Swap Agreements:
Institutional counterparties	$	—	$	—	$	—	$	—	$	—	$	—
Commercial counterparties	7,799		—		7,799		—		—		7,799
Total	$	7,799	$	—	$	7,799	$	—	$	—	$	7,799

Schedule of liabilities subject to an enforceable master netting arrangement

Offsetting of Financial Liabilities and Derivative Liabilities

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of June 30, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	(12,738	)	$	170	$	(12,568	)	$	10,868	$	1,700	$	—
Commercial counterparties	(144		)	—		(144		)	—		—		(144		)
Total	$	(12,882	)	$	170	$	(12,712	)	$	10,868	$	1,700	$	(144	)

Offsetting of Financial Liabilities and Derivative Liabilities

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of December 31, 2013
Interest Rate Swap Agreements:
Institutional counterparties	$	(13,157	)	$	1,913	$	(11,244	)	$	9,544	$	1,700	$	—
Commercial counterparties	(720		)	—		(720		)	—		—		(720		)
Total	$	(13,877	)	$	1,913	$	(11,964	)	$	9,544	$	1,700	$	(720	)