XML 30 R17.htm IDEA: XBRL DOCUMENT
v3.19.1

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 3 Months Ended
--- | ---
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES As part of its overall asset and liability management strategy, the Company periodically uses derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Company’s interest rate risk management strategy involves modifying the re-pricing characteristics of certain assets or liabilities so the changes in interest rates do not have a significant effect on net interest income. The Company recognizes its derivative instruments on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). The Company formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items. Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income or loss. The Company discontinues hedge accounting when it is determined the derivative is no longer effective in offsetting changes of the hedged risk on the hedged item, or management determines the designation of the derivative as a hedging instrument is no longer appropriate. The following tables present information about derivative assets and liabilities at March 31, 2019 and December 31, 2018:
|  | March 31, 2019
|  | Notional Amount |  | Weighted Average Maturity |  | Estimated Fair Value Asset (Liability)
|  | (in thousands) |  | (in years) |  | (in thousands)
Cash flow hedges: |  |  |  |  |  |  |  |
Interest rate cap agreements |  | $ | 90,000 |  |  | 3.9 |  | $ | 320 |
Interest rate swap on deposits |  | 50,000 |  |  | 5.0 |  | (525 | )
Total cash flow hedges |  | 140,000 |  |  |  |  | (205 | )
Economic hedges: |  |  |  |  |  |  |  |
Forward sale commitments |  | 3,257 |  |  | 0.1 |  | (65 | )
Total economic hedges |  | 3,257 |  |  |  |  | (65 | )
Non-hedging derivatives: |  |  |  |  |  |  |  |
Interest rate lock commitments |  | 4,828 |  |  | 0.1 |  | 14 |
Customer loan derivative liability |  | 58,684 |  |  | 10.8 |  | (2,852 | )
Customer loan derivative asset |  | 58,684 |  |  | 10.8 |  | 2,852 |
Total non-hedging derivatives |  | 122,196 |  |  |  |  | 14 |
Total |  | $ | 265,453 |  |  |  |  | $ | (256 | )
|  | December 31, 2018
|  | Notional Amount |  | Weighted Average Maturity |  | Estimated Fair Value Asset (Liability)
|  | (in thousands) |  | (in years) |  | (in thousands)
Cash flow hedges: |  |  |  |  |  |  |  |
Interest rate cap agreements |  | $ | 90,000 |  |  | 4.1 |  | $ | 803 |
Total cash flow hedges |  | 90,000 |  |  | 4.1 |  | 803 |
Non-hedging derivatives: |  |  |  |  |  |  |  |
Interest rate lock commitments |  | 957 |  |  | 0.1 |  | 8 |
Customer loan derivative liability |  | 45,641 |  |  | 9.9 |  | (1,353 | )
Customer loan derivative asset |  | 45,641 |  |  | 9.9 |  | 1,353 |
Total non-hedging derivatives |  | 92,239 |  |  |  |  | 8 |
Total |  | $ | 182,239 |  |  |  |  | $ | 811 |
Information about derivative assets and liabilities for the three months ended March 31, 2019 and 2018 is, as follows:
|  | Three Months Ended March 31,
(in thousands) |  | 2019 |  | 2018
Cash flow hedges: |  |  |  |
Interest rate cap agreements |  |  |  |
Realized gain (loss) in interest expense |  | $ | 163 |  |  | $ | (108 | )
Economic hedges: |  |  |  |  |  |
Forward commitments |  |  |  |  |  |
Realized (loss) gain in other non-interest income |  | (65 | ) |  | 170 |
Non-hedging derivatives: |  |  |  |  |  |
Interest rate lock commitments |  |  |  |  |  |
Realized gain in other non-interest income |  | 6 |  |  | 8 |
Cash flow hedges Interest rate cap agreements In 2014, interest rate cap agreements were purchased to limit the Company’s exposure to rising interest rates on four rolling, three-month borrowings indexed to three-month LIBOR. Under the terms of the agreements, the Company paid total premiums of $4.6 million for the right to receive cash flow payments if three-month LIBOR rises above the caps of 3.00%, thus effectively ensuring interest expense on the borrowings at maximum rates of 3.00% for the duration of the agreements. The interest rate cap agreements were designated as cash flow hedges. The fair values of the interest rate cap agreements are included in other assets on the Company’s consolidated balance sheets. Changes in the fair value, representing unrealized gains or losses, are recorded in accumulated other comprehensive income, net of tax. The premiums paid on the interest rate cap agreements are being recognized as increases in interest expense over the duration of the agreements using the caplet method. Interest rate swap on deposits In March 2019, the Company entered into an interest rate swap on brokered deposits (the "SWAP") to limit its exposure to rising interest rates over a five year term. Under the terms of the agreement, the Company pays a fixed rate of 2.461% for a notional amount of $50.0 million, and the financial institution counterparty pays interest on the three-month LIBOR rate. The Company designated the SWAP as a cash flow hedge and the fair value is included in other liabilities on the Company's consolidated balance sheets. Changes in the fair value, representing unrealized gains or losses, are recorded in accumulated other comprehensive income, net of tax. Economic hedges The Company utilizes forward sale commitments to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans originated for sale. The forward sale commitments are accounted for as derivatives with changes in fair value recorded in current period earnings. The Company typically uses mandatory delivery contracts, which are loan sale agreements where the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, the Company may enter into mandatory delivery contracts shortly after the loan closes with a customer. Non-hedging derivatives Interest rate lock commitments The Company enters into interest rate lock commitments (“IRLCs”) for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs relate to the origination of residential mortgage loans held for sale are considered as derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose the Company to the risk that the market price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in non-interest income in the Company’s consolidated statements of income. Changes in the fair value of IRLCs subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability when the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. Customer loan derivatives The Company enters into customer loan derivatives to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting loan swap agreements with highly rated third-party financial institutions. The loan swap agreements are free-standing derivatives and are recorded at fair value in the Company's consolidated balance sheet. The Company is party to master netting arrangements with its financial institutional counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all loan swap agreements, as well as collateral or cash funds, in the event of default on, or termination of, any one contract. Collateral is provided by cash or securities received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds. Currently, the Company has posted cash of $1.9 million with the counterparty.

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://fasb.org/us-gaap/role/ref/legacyRef -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