Derivatives

9 Months Ended

Sep. 30, 2016

Summary of Derivative Instruments [Abstract]

Derivatives

DERIVATIVES

BancShares had an interest rate swap entered into during 2011 that qualified as a cash flow hedge under GAAP. BancShares' interest rate swap agreement expired in June 2016. At December 31, 2015, the fair value of the outstanding derivative was included in other liabilities in the Consolidated Balance Sheet, and the net change in fair value is included in the Consolidated Statements of Cash Flows under the caption net change in other liabilities.

The following table provides the notional amount of the interest rate swap and the fair value of the liability as of December 31, 2015.

	December 31, 2015
(Dollars in thousands)	Notional  amount		Estimated fair value of liability
2011 interest rate swap hedging variable rate exposure on trust preferred securities 2011-2016	$	93,500	$	1,429

The interest rate swap was used for interest rate risk management purposes and converted variable-rate exposure on outstanding debt to a fixed rate.

BancShares’ interest rate swap was fully effective since inception. Therefore, changes in the fair value of the interest rate swap had no impact on net income. For the three months ended September 30, 2015, BancShares recognized interest expense of $829 thousand, and for the nine months ended September 30, 2016 and 2015, BancShares recognized interest expense of $1.5 million and $2.5 million, respectively, resulting from incremental interest paid to the interest rate swap counterparty, none of which related to ineffectiveness.