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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
12 Months Ended
Dec. 31, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
NOTE 19. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 
During 2010, the Company entered into an interest rate swap to lock in a fixed rate as opposed to the contractual variable interest rate on the junior subordinated debentures. The interest rate swap contract has a notional amount of $37.1 million and is hedging the variable rate on the junior subordinated debentures described in Note 17 of the consolidated financial statements. The Company receives a variable rate of the 90-day LIBOR rate plus 1.63% and pays a fixed rate of 4.11%. The swap matures in September 2020.
 
This contract is classified as a cash flow hedge of an exposure to changes in the cash flow of a recognized liability. At December 31, 2015 and 2014, the fair value of the remaining instrument totaled a liability of $1,439,000 and $1,315,000, respectively. As a cash flow hedge, the change in fair value of a hedge that is deemed to be highly effective is recognized in other comprehensive income and the portion deemed to be ineffective is recognized in earnings. As of December 31, 2015, the hedge is deemed to be highly effective.
 
Mortgage Banking Derivatives
 
The Company maintains a risk management program to manage interest rate risk and pricing risk associated with its mortgage lending activities. This program includes the use of forward contracts and other derivatives that are used to offset changes in value of the mortgage inventory due to changes in market interest rates. As a normal part of its operations, the Company enters into derivative contracts such as forward sale commitments and IRLCs to economically hedge risks associated with overall price risk related to IRLCs and mortgage loans held for sale carried at fair value. These mortgage banking derivatives are not designated in hedge relationships. At December 31, 2015, the Company had approximately $77.7 million of IRLCs and $74.5 million of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected as a derivative asset of $2.7 million and a derivative liability of $137,000. At December 31, 2014, the Company had approximately $38.9 million of IRLCs and $46.5 million of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected as a derivative asset of $1.8 million and a derivative liability of $249,000. Fair values were estimated based on changes in mortgage interest rates from the date of the commitments. Changes in the fair values of these mortgage-banking derivatives are included in net gains on sales of loans.
 
The net gains (losses) relating to free-standing derivative instruments used for risk management are summarized below as of December 31, 2015, 2014 and 2013:
 
 
 
 
 
December 31,
 
December 31,
 
December 31,
 
 
 
Location
 
2015
 
2014
 
2013
 
 
 
 
 
(Dollars in Thousands)
 
Forward contracts related to mortgage loans held for sale
 
Mortgage banking activity
 
$
(137)
 
$
(249)
 
$
98
 
Interest rate lock commitments
 
Mortgage banking activity
 
$
2,687
 
$
1,757
 
$
1,082
 
 
The following table reflects the amount and market value of mortgage banking derivatives included in the Consolidated Balance Sheets as of December 31, 2015 and 2014:
 
 
 
2015
 
2014
 
 
 
Notional
 
 
 
Notional
 
 
 
 
 
Amount
 
Fair Value
 
Amount
 
Fair Value
 
 
 
(Dollars in Thousands)
 
Included in other assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward contracts related to mortgage loans held for sale
 
$
-
 
$
-
 
$
-
 
$
-
 
Interest rate lock commitments
 
 
77,710
 
 
2,687
 
 
38,868
 
 
1,757
 
Total included in other assets
 
$
77,710
 
$
2,687
 
$
38,868
 
$
1,757
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in other liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward contracts related to mortgage loans held for sale
 
$
123,500
 
$
137
 
$
46,500
 
$
249
 
Interest rate lock commitments
 
 
-
 
 
-
 
 
-
 
 
-
 
Total included in other liabilities
 
$
123,500
 
$
137
 
$
46,500
 
$
249