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Derivatives
 6 Months Ended
Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives DERIVATIVES
Lakeland is a party to interest rate derivatives that are not designated as hedging instruments. Under a program, Lakeland executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Lakeland executes with a third party, such that Lakeland minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties. Lakeland had $23.5 million and $498,000, respectively, in available for sale securities pledged for collateral on its interest rate swaps with the financial institution for June 30, 2019 and December 31, 2018.
In June 2016, the Company entered into two cash flow hedges in order to hedge the variable cash outflows associated with its subordinated debentures. The notional value of these hedges was $30.0 million. The Company’s objectives in using cash flow hedges are to add stability to interest expense and to manage its exposure to interest rate movements. The Company used interest rate swaps designated as cash flow hedges which involved the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In these particular hedges the Company is paying a third party an average of 1.10% in exchange for a payment at 3 month LIBOR. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the six months ended June 30, 2019, the Company did not record any hedge ineffectiveness. The Company recognized $238,000 and $132,000 of accumulated other comprehensive income that was reclassified into interest expense for the first six months of 2019 and 2018, respectively.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt. During the next twelve months, the Company estimates that $314,000 will be reclassified as a decrease to interest expense should the rate environment remain the same.
The following table presents summary information regarding these derivatives for the periods presented (dollars in thousands):
June 30, 2019
Notional Amount
 
Average
Maturity (Years)
 
Weighted Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
3rd Party interest rate swaps
$
38,141

 
7.0
 
3.72
%
 
1 Mo. LIBOR + 2.24%
 
$
502

Customer interest rate swaps
333,681

 
10.3
 
4.58
%
 
1 Mo. LIBOR + 1.97%
 
22,467

Interest rate swap (cash flow hedge)
30,000

 
2.0
 
1.10
%
 
3 Mo. LIBOR
 
403

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
Customer interest rate swaps
$
38,141

 
7.0
 
3.72
%
 
1 Mo. LIBOR + 2.24%
 
$
(502
)
3rd Party interest rate swaps
333,681

 
10.3
 
4.58
%
 
1 Mo. LIBOR + 1.97%
 
(22,467
)
December 31, 2018
Notional
 Amount
 
Average
Maturity (Years)
 
Weighted 
Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
      3rd Party interest rate swaps
$
153,909

 
8.3
 
4.10
%
 
1 Mo. LIBOR + 2.13%
 
$
5,329

      Customer interest rate swaps
164,427

 
12.0
 
5.04
%
 
1 Mo. LIBOR + 2.05%
 
5,707

      Interest rate swap (cash flow hedge)
30,000

 
2.5
 
1.10
%
 
3 Mo. LIBOR
 
1,099

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
      Customer interest rate swaps
$
153,909

 
8.3
 
4.10
%
 
1 Mo. LIBOR + 2.13%
 
$
(5,329
)
      3rd party interest rate swaps
164,427

 
12.0
 
5.04
%
 
1 Mo. LIBOR + 2.05%
 
(5,707
)