Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

17. DERIVATIVE FINANCIAL INSTRUMENTS

In order to accommodate the borrowing needs of certain commercial customers, the Company entered into interest rate swap or cap agreements with those customers. In order to offset the exposure and manage interest rate risk, at the time an agreement was entered into with a customer, the Company entered into an interest rate swap or cap with a correspondent bank counterparty with offsetting terms. These derivative instruments are not designated as accounting hedges and changes in the net fair value are recognized in noninterest income or expense. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts substantially offset each other and do not have a material impact on our results of operations. The fair value amounts are included in other assets and other liabilities.

The following is a summary of the interest rate swaps outstanding as of the dates set forth:

	March 31, 2016
	Notional Amount		Fixed Rate	Floating Rate	Maturity	Fair Value
	(Dollars in thousands)
Non-hedging derivative instruments:
Customer interest rate swap:
receive fixed/pay floating	$	137,251	3.99% - 5.99%	LIBOR 1 month + 2.5% - 4.50%	Wtd. Avg. 3.2 years	$	3,152
Correspondent interest rate swap:
pay fixed/receive floating	$	137,251	3.99% - 5.99%	LIBOR 1 month + 2.5% - 4.50%	Wtd. Avg. 3.2 years	$	(3,321)

	December 31, 2015
	Notional Amount		Fixed Rate	Floating Rate	Maturity	Fair Value
	(Dollars in thousands)
Non-hedging derivative instruments:
Customer interest rate swap:
receive fixed/pay floating	$	115,459	3.99% - 5.99%	LIBOR 1 month + 2.5% - 4.50%	Wtd. Avg. 3.1 years	$	1,528
Correspondent interest rate swap:
pay fixed/receive floating	$	115,459	3.99% - 5.99%	LIBOR 1 month + 2.5% - 4.50%	Wtd. Avg. 3.1 years	$	(1,612)

The estimated fair values of non-hedging derivative instruments are reflected within Company’s consolidated balance sheet; customer interest rate swaps are included in other assets and correspondent interest rate swaps are included in other liabilities. The notional amounts and estimated fair values of the non-hedging derivative instruments by classification as the dates set forth were as follows:

	March 31, 2016				December 31, 2015
	Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars in thousands)
Included in other assets:
Commercial customer counterparty:
Interest rate swap	$	137,251	$	3,152	$	115,459	$	1,528
Financial institution counterparty:
Interest rate cap		16,848		7		16,929		25
Total included in other assets	$	154,099	$	3,159	$	132,388	$	1,553
Included in other liabilities:
Financial institution counterparty:
Interest rate swap	$	137,251	$	(3,321)	$	115,459	$	(1,612)
Commercial customer counterparty:
Interest rate cap		16,848		(7)		16,929		(25)
Total included in other liabilities	$	154,099	$	(3,328)	$	132,388	$	(1,637)

The strike rate for the outstanding caps was 6.00% at both March 31, 2016 and December 31, 2015.