Derivative Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company enters into contracts that meet the definition of derivative financial instruments in accordance with ASC Topic 815 – Derivative and Hedging. Derivatives are used as part of a risk management strategy to address exposure to changes in interest rates including those inherent in the Company’s origination and sale of certain residential mortgages into the secondary market. These derivative contracts used for risk management purposes include: (1) interest rate lock commitments provided to customers to fund mortgage loans intended to be sold; (2) forward sale contracts for the future delivery of funded residential mortgages; and (3) interest rate swap contracts.

Forward sale contracts are entered into when interest rate lock commitments are granted to customers in an effort to economically hedge the effect of future changes in interest rates on the commitments to fund mortgage loans intended to be sold (the “pipeline”), as well as on the portfolio of funded mortgages not yet sold (the “warehouse”). For accounting purposes, these derivatives are not designated as being in a hedging relationship. The contracts are carried at fair value in the Consolidated Balance Sheets, with changes in fair value recorded in the Consolidated Statements of Operations.

The Company has developed a program to enter into interest rate swap arrangements to manage the interest rate risk exposure associated with specific commercial loan relationships at the time such loans are originated. These interest rate swaps, as well as the embedded derivatives associated with certain of its commercial loan relationships, are derivative financial instruments under GAAP. None of these derivative financial instruments are designated by the Company as accounting hedges as specified in GAAP. As such, the fair market value of the interest rate swaps and embedded derivatives are carried in the Consolidated Balance Sheets as derivative assets or liabilities, as the case may be, and periodic changes in fair market value of such financial instruments are recorded through periodic earnings in other non-interest income in the Consolidated Statements of Operations.

The Company's derivative financial instruments are summarized as follows:

		December 31,
		2015				2014
	Balance Sheet Location	Notional Amount		Estimated Fair Value		Notional Amount		Estimated Fair Value
		(In thousands)
Derivative assets:
Interest rate lock commitments (1)	Other assets	$	18,605	$	189	$	14,633	$	154
Forward contracts to sell mortgage loans (2)	Other assets	—		—		4,000		2
Interest rate swap contracts	Other assets	78,433		2,081		—		—
Derivative liabilities:
Interest rate lock commitments (1)	Other liabilities	555		6		2,108		14
Forward contracts to sell mortgage loans (2)	Other liabilities	24,000		90		16,000		174
Interest rate swap contracts	Other liabilities	78,433		2,081		—		—

(1) Interest rate lock commitments include $11.8 million and $7.9 million of commitments not yet approved in the credit underwriting process at December 31, 2015 and 2014, respectively, yet represent potential interest rate risk exposure to the extent those mortgage loan applications are eventually approved for funding.

(2) The Company, as of the quarter ended September 30, 2015, has elected to offset the fair value of individual forward sale contracts and present a net amount in the Consolidated Balance Sheets in accordance with ASC Topic 815-45.

Net gains (losses) included in the Consolidated Statements of Operations related to derivative financial instruments, recognized in net gain on sale of loans, are summarized as follows:

	Year Ended December 31, 2015			Year Ended December 31, 2014			Nine Months Ended December 31, 2013
	(In thousands)
Interest rate lock commitments	$	44		$	141		$	(688	)
Unused commitments	—			(26		)	26
Forward contracts to sell mortgage loans	(192		)	(848		)	2,463
Total	$	(148	)	$	(733	)	$	1,801