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DERIVATIVES | 9 Months Ended
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Sep. 30, 2018
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
DERIVATIVES | 11. DERIVATIVES The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with a notional amount of $230.0 million and $180.0 million as of September 30, 2018 and December 31, 2017, respectively, were designated as cash flow hedges of certain interest-bearing deposits and were determined to be fully effective during the nine months ended September 30, 2018. As such, no amount of ineffectiveness has been included in net income during the three and nine months ended September 30, 2018. Therefore, the aggregate fair value of the swaps is recorded in other assets/liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. The following table presents information about the interest rate swaps designated as cash flow hedges as of September 30, 2018 and December 31, 2017:
(Dollars in thousands) |  | September 30, 2018 |  |  |  | December 31, 2017 |  |
Notional amount |  | $ | 230,000 |  |  |  | $ | 180,000 |  |
Weighted average pay rate |  |  | 2.04 |  | % |  |  | 1.64 |  | %
Weighted average receive rate |  |  | 2.07 |  | % |  |  | 1.33 |  | %
Weighted average maturity |  |  | 2.90 |  | years |  |  | 2.25 |  | years
Unrealized gain, net |  | $ | 3,536 |  |  |  | $ | 1,394 |  |
Number of contracts |  |  | 11 |  |  |  |  | 9 |  |
Net interest income recorded on these swap transactions totaled $124 thousand and $137 thousand for the three and nine months ended September 30, 2018, respectively, and is reported as a component of interest expense. Net interest expense recorded on these swap transactions totaled $150 thousand and $763 thousand for the three and nine months ended September 30, 2017, respectively, and is reported as a component of interest expense. Cash Flow Hedges The following table presents the net gain recorded in accumulated other comprehensive (loss)/income and the consolidated financial statements relating to the cash flow derivative instruments for the three and nine months ended September 30, 2018 and September 30, 2017 (after tax):
|  | For the Three Months Ended September 30, |
(In thousands) |  | 2018 |  |  | 2017 |
Interest rate contracts |  |  |  |  |  |  |  |
Amount of gain/(loss) recognized in OCI (effective portion) |  | $ | 514 |  |  | $ | 131 |
Amount of gain/(loss) reclassified from OCI to interest expense |  |  | 20 |  |  |  | — |
Amount of gain/(loss) recognized in other non-interest expense |  |  | — |  |  |  | — |
|  | For the Nine Months Ended September 30, |
(In thousands) |  | 2018 |  |  | 2017 |
Interest rate contracts |  |  |  |  |  |  |  |
Amount of gain/(loss) recognized in OCI (effective portion) |  | $ | 1,597 |  |  | $ | 605 |
Amount of gain/(loss) reclassified from OCI to interest expense |  |  | 64 |  |  |  | — |
Amount of gain/(loss) recognized in other non-interest expense |  |  | — |  |  |  | — |
During the first quarter of 2018, the Company recognized an unrealized after-tax gain of $220 thousand in accumulated other comprehensive income/(loss) related to the termination of two interest rate swaps designated as cash flow hedges. The gain will be amortized into earnings over the remaining life of the terminated swaps. The Company recognized pre-tax interest income of $31 thousand and $93 thousand for the three and nine months ended September 30, 2018, respectively, related to the amortization of the gain on the terminated interest rate swaps designated as cash flow hedges. The following tables reflect the cash flow hedges included in Other Assets in the financial statements as of September 30, 2018 and December 31, 2017:
|  | September 30, 2018 |
|  | Notional |  |  | Fair |
(In thousands) |  | Amount |  |  | Value |
Interest rate swaps related to interest-bearing deposits |  | $ | 230,000 |  |  | $ | 3,536 |
|  | December 31, 2017 |
|  | Notional |  |  | Fair |
(In thousands) |  | Amount |  |  | Value |
Interest rate swaps related to interest-bearing demand brokered deposits |  | $ | 180,000 |  |  | $ | 1,394 |
Derivatives Not Designated as Accounting Hedges: The Company offers facility specific/loan level swaps to its customers and offsets its exposure from such contracts by entering into mirror image swaps with a financial institution / swap counterparty (loan level / back to back swap program). The customer accommodations and any offsetting swaps are treated as non-hedging derivative instruments which do not qualify for hedge accounting (“standalone derivatives”). The notional amount of the swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual contracts. The fair value of the swaps is recorded as both an asset and a liability, in other assets and other liabilities, respectively, in equal amounts for these transactions. Information about these swaps is as follows:
(Dollars in thousands) |  | September 30, 2018 |  |  |  | December 31, 2017 |  |
Notional amount |  | $ | 425,151 |  |  |  | $ | 317,363 |  |
Fair value |  | $ | 12,027 |  |  |  | $ | 3,131 |  |
Weighted average pay rates |  |  | 4.28 |  | % |  |  | 4.11 |  | %
Weighted average receive rates |  |  | 4.05 |  | % |  |  | 3.43 |  | %
Weighted average maturity |  |  | 7.5 |  | years |  |  | 7.6 |  | years
Number of contracts |  |  | 57 |  |  |  |  | 42 |  |

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- 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
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