DERIVATIVE INSTRUMENTS AND OFFSETTING ASSETS AND LIABILITIES

3 Months Ended

Jun. 30, 2014

DERIVATIVE INSTRUMENTS [Abstract]

DERIVATIVE INSTRUMENTS

NOTE 13 – DERIVATIVE INSTRUMENTS AND OFFSETTING ASSETS AND LIABILITIES

The derivatives held by the Company include commitments to fund fixed-rate mortgage loans to customers and forward commitments to sell individual fixed-rate mortgage loans.  The Company’s objective in obtaining the forward commitments is to mitigate the interest rate risk associated with the commitments to fund the fixed-rate mortgage loans.  Both the commitments to fund fixed-rate mortgage loans and the forward commitments to sell individual fixed-rate mortgage loans are reported at fair value, with adjustments being recorded in current period earnings, and are not accounted for as hedges.  At June 30, 2014, the notional amount of forward commitments to sell individual fixed-rate mortgage loans was $151.3 million with a carrying value and fair value reflecting a loss of$1.0 million.  At June 30, 2013, the notional amount of forward commitments to sell individual fixed-rate mortgage loans was $298.6 million with a carrying value and fair value reflecting a gain of $7.0 million.  At June 30, 2014, the notional amount of commitments to fund individual fixed-rate mortgage loans was $114.2million with a carrying value and fair value reflecting a gain of $3.5 million.  At June 30, 2013, the notional amount of commitments to fund individual fixed-rate mortgage loans was $173.7 million with a carrying value and fair value reflecting a gain of approximately $292,000. 

The Company also enters into derivative financial instruments in the form of interest rate swaps to meet the financing, interest rate and equity risk management needs of its customers.  Upon entering into these interest rate swaps to meet customer needs, the Company enters into offsetting positions to minimize interest rate and equity risk to the Company.  These derivative financial instruments are reported at fair value with any resulting gain or loss recorded in current period earnings.  These instruments and their offsetting positions are recorded in other assets and other liabilities on the consolidated balance sheets.  As of June 30, 2014, the notional amount of customer related derivative financial instruments was $352.7million with an average maturity of 53 months, an average interest receive rate of 2.5% and an average interest pay rate of 5.6%.  As of June 30, 2013, the notional amount of customer related derivative financial instruments was $465.0 million with an average maturity of 57 months, an average interest receive rate of 2.5% and an average interest pay rate of 5.6%.

Certain financial instruments such as derivatives, may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements or similar agreements. The Bank’s derivative transactions with upstream financial institution counterparties are generally executed under International Swaps and Derivative Association  master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis.  Nonetheless, the Bank does not generally offset such financial instruments for financial reporting purposes.

The following tables present components of financial instruments eligible for offsetting for the periods indicated:

	June 30, 2014
				Gross Amounts Not Offset
				in the Consolidated
				Balance Sheet
					Financial
	Gross Amount	Gross Amount	Net Amount	Financial	Collateral	Net
	Recognized	Offset	Recognized	Instruments	Pledged	Amount
	(In thousands)
Financial assets:
Derivatives:
Forward commitments	$                3,607	$                      -	$               3,607	$                  -	$                  -	$          3,607
Loan/lease interest rate swaps	26,434	-	26,434	-	-	26,434
Total financial assets	$              30,041	$                      -	$             30,041	$                  -	$                  -	$        30,041
Financial liabilities:
Derivatives:
Forward commitments	$                1,159	$                      -	$               1,159	$                  -	$                  -	$          1,159
Loan/lease interest rate swaps	26,434	-	26,434	-	(26,434)	-
Repurchase arrangements	394,446	-	394,446	(394,446)	-	-
Total financial liabilities	$            422,039	$                      -	$           422,039	$     (394,446)	$       (26,434)	$          1,159

	December 31, 2013
				Gross Amounts Not Offset
				in the Consolidated
				Balance Sheet
					Financial
	Gross Amount	Gross Amount	Net Amount	Financial	Collateral	Net
	Recognized	Offset	Recognized	Instruments	Pledged	Amount
	(In thousands)
Financial assets:
Derivatives:
Forward commitments	$                1,324	$                      -	$               1,324	$                  -	$                  -	$          1,324
Loan/lease interest rate swaps	29,249	-	29,249	-	-	29,249
Total financial assets	$              30,573	$                      -	$             30,573	$                  -	$                  -	$        30,573
Financial liabilities:
Derivatives:
Forward commitments	$                   103	$                      -	$                  103	$                  -	$                  -	$             103
Loan/lease interest rate swaps	29,249	-	29,249	-	(29,249)	-
Repurchase arrangements	421,028	-	421,028	(421,028)	-	-
Total financial liabilities	$            450,380	$                      -	$           450,380	$     (421,028)	$       (29,249)	$             103

	June 30, 2013
				Gross Amounts Not Offset
				in the Consolidated
				Balance Sheet
					Financial
	Gross Amount	Gross Amount	Net Amount	Financial	Collateral	Net
	Recognized	Offset	Recognized	Instruments	Pledged	Amount
	(In thousands)
Financial assets:
Derivatives:
Forward commitments	$                8,423	$                      -	$               8,423	$                  -	$                  -	$          8,423
Loan/lease interest rate swaps	35,345	-	35,345	-	-	35,345
Total financial assets	$              43,768	$                      -	$             43,768	$                  -	$                  -	$        43,768
Financial liabilities:
Derivatives:
Forward commitments	$                1,129	$                      -	$               1,129	$                  -	$                  -	$          1,129
Loan/lease interest rate swaps	35,345	-	35,345	-	(35,345)	-
Repurchase arrangements	382,871	-	382,871	(382,871)	-	-
Total financial liabilities	$            419,345	$                      -	$           419,345	$     (382,871)	$       (35,345)	$          1,129