XML 29 R18.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Derivative Financial Instruments | 3 Months Ended
--- | ---
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments |
11. | DERIVATIVE FINANCIAL INSTRUMENTS
The Bank is exposed to certain risks relating to its ongoing business operations and utilizes interest rate swap agreements (“swaps”) as part of its asset/liability management strategy to help manage its interest rate risk position. As of March 31, 2018, the Bank has entered into 77 interest-rate swap agreements with customers. The Bank then entered into identical offsetting swaps with a counterparty bank. The swap agreements are not designated as hedging instruments. The purpose of entering into offsetting derivatives not designated as a hedging instrument is to provide the Bank a variable-rate loan receivable and to provide the customer the financial effects of a fixed-rate loan without creating significant volatility in the Bank’s earnings. The structure of the swaps is as follows. The Bank enters into an interest rate swap with its customers in which the Bank pays the customer a variable rate and the customer pays the Bank a fixed rate, therefore allowing customers to convert variable rate loans to fixed rate loans. At the same time, the Bank enters into a swap with the counterparty bank in which the Bank pays the counterparty a fixed rate and the counterparty in return pays the Bank a variable rate, which has the effect of passing on the interest-rate risk associated with the customer’s fixed rate swap to the counterparty bank. The net effect of the transaction allows the Bank to receive interest on the loan from the customer at a variable rate based on LIBOR plus a spread. The changes in the fair value of the swaps primarily offset each other and therefore should not have a significant impact on the Company’s results of operations, although the Company does incur credit and counterparty risk with respect to performance on the swap agreements by the Bank’s customer and counterparty, respectively. Our interest rate swap derivatives are subject to a master netting arrangement with one counterparty bank. None of our derivative assets and liabilities are offset in the balance sheet. We believe our risk of loss associated with our counterparty borrowers related to interest rate swaps is mitigated as the loans with swaps are underwritten to take into account potential additional exposure, although there can be no assurances in this regard since the performance of our swaps is subject to market and counterparty risk. Balance Sheet Classification of Derivative Financial Instruments As of March 31, 2018 and December 31, 2017, the total notional amount of the Company’s swaps was $191.4 million, and $198.5 million, respectively. The location of the asset and liability, and their respective fair values are summarized in the tables below.
|  | March 31, 2018 |
|  | Asset Derivatives |  |  | Liability Derivatives |
|  | Balance Sheet Location |  |  | Fair Value |  |  | Balance Sheet Location |  |  | Fair Value |
|  | (Dollars in thousands) |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | Other assets |  |  | $ | 1,645 |  |  |  | Other liabilities |  |  | $ | 1,645 |
Total derivatives |  |  |  |  |  | $ | 1,645 |  |  |  |  |  |  | $ | 1,645 |
|  | December 31, 2017 |
|  | Asset Derivatives |  |  | Liability Derivatives |
|  | Balance Sheet Location |  |  | Fair Value |  |  | Balance Sheet Location |  |  | Fair Value |
|  | (Dollars in thousands) |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | Other assets |  |  | $ | 3,211 |  |  |  | Other liabilities |  |  | $ | 3,211 |
Total derivatives |  |  |  |  |  | $ | 3,211 |  |  |  |  |  |  | $ | 3,211 |
The Effect of Derivative Financial Instruments on the Condensed Consolidated Statements of Earnings The following table summarizes the effect of derivative financial instruments on the condensed consolidated statement of earnings for the periods presented.
Derivatives Not Designated as Hedging Instruments |  | Location of Gain Recognized in Income on Derivative Instruments |  |  | Amount of Gain Recognized in Income on Derivative Instruments |
|  |  |  |  | For the Three Months Ended March 31, |
|  |  |  |  | 2018 |  |  | 2017 |
|  |  |  |  | (Dollars in thousands) |
Interest rate swaps |  |  | Other income |  |  | $ | 116 |  |  | $ | 323 |
Total |  |  |  |  |  | $ | 116 |  |  | $ | 323 |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration