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Derivative Instruments | 6 Months Ended
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Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments |
8. | DERIVATIVE INSTRUMENTS
On May 3, 2011, the Corporation executed an interest rate swap agreement with a 5 year term and an effective date of September 15, 2013 in order to hedge cash flows associated with $10 million of a subordinated note that was issued by the Corporation during 2007 and elected cash flow hedge accounting for the agreement. The Corporation’s objective in using this derivative is to add stability to interest expense and to manage its exposure to interest rate risk. The interest rate swap involves the receipt of variable-rate amounts in exchange for fixed-rate payments from September 15, 2013 to September 15, 2018 without exchange of the underlying notional amount. At June 30, 2015, the variable rate on the subordinated debt was 1.84% (LIBOR plus 155 basis points) and the Corporation was paying 5.57% (4.02% fixed rate plus 155 basis points). As of June 30, 2015 and December 31, 2014, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Corporation does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. The following tables provide information about the amounts and locations of activity related to the interest rate swaps designated as cash flow hedges within the Corporation’s consolidated balance sheet and statement of income as of June 30, 2015 and December 31, 2014 and for the three and six months ended June 30, 2015 and 2014:
|  |  |  | Fair value as of |
|  | Balance Sheet |  | June 30, |  | December 31, |
|  | Location |  | 2015 |  | 2014 |
Interest rate contracts |  | Accrued interest and other liabilities |  | ($877) |  | ($ | 946 | )
For the Three Months |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ended June 30, 2015 |  |  | (a) |  |  | (b) |  |  | (c) |  |  | (d) |  |  | (e) |
Interest rate contracts |  | $ | 63 |  |  | Interest expense – subordinated debentures |  | ($ | 94 | ) |  | Other income |  | $ | 0 |
For the Six Months |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ended June 30, 2015 |  |  | (a | ) |  | (b) |  |  | (c) |  |  | (d) |  |  | (e) |
Interest rate contracts |  | $ | 45 |  |  | Interest expense – subordinated debentures |  | ($ | 189 | ) |  | Other income |  | $ | 0 |
For the Three Months |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ended June 30, 2014 |  |  | (a) |  |  | (b) |  |  | (c) |  |  | (d) |  |  | (e) |
Interest rate contracts |  | $ | 17 |  |  | Interest expense – subordinated debentures |  | ($ | 95 | ) |  | Other income |  | $ | 0 |
For the Six Months |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ended June 30, 2014 |  |  | (a | ) |  | (b) |  |  | (c) |  |  | (d) |  |  | (e) |
Interest rate contracts |  | ($ | 7 | ) |  | Interest expense – subordinated debentures |  | ($ | 191 | ) |  | Other income |  | $ | 0 |
(a) | Amount of Gain or (Loss) Recognized in Other Comprehensive Loss on Derivative (Effective Portion), net of tax
(b) | Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)
(c) | Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)
(d) | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
(e) | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Amounts reported in accumulated other comprehensive loss related to the interest rate swap will be reclassified to interest expense as interest payments are made on the subordinated debentures. Such amounts reclassified from accumulated other comprehensive loss to interest expense in the next twelve months are expected to be $373. As of June 30, 2015 and December 31, 2014, a cash collateral balance in the amount of $1,400 was maintained with a counterparty to the interest rate swaps. These balances are included in interest bearing deposits with other banks on the consolidated balance sheet.

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