Borrowed Funds

Borrowed funds consist of the following obligations as of:



	March 31, 2018				December 31, 2017
	Amount		Rate		Amount		Rate
FHLB advances	$	260,000	1.94	%	$	290,000	1.94	%
Securities sold under agreements to repurchase without stated maturity dates	32,913		0.09	%	54,878		0.12	%
Federal funds purchased	10,200		1.89	%	—		—	%
Total	$	303,113	1.74	%	$	344,878	1.65	%

FHLB advances are collateralized by a blanket lien on all qualified 1-4 family residential real estate loans, specific AFS securities, and FHLB stock.

The following table lists the maturities and weighted average interest rates of FHLB advances as of:



	March 31, 2018				December 31, 2017
	Amount		Rate		Amount		Rate
Fixed rate due 2018	$	30,000	1.57	%	$	70,000	1.96	%
Fixed rate due 2019	85,000		1.87	%	85,000		1.87	%
Fixed rate due 2020	35,000		1.80	%	35,000		1.80	%
Fixed rate due 2021	50,000		1.91	%	50,000		1.91	%
Variable rate due 2021 ¹	10,000		2.15	%	10,000		1.72	%
Fixed rate due 2022	20,000		1.97	%	20,000		1.97	%
Fixed rate due 2023	20,000		3.36	%	10,000		3.90	%
Fixed rate due 2026	10,000		1.17	%	10,000		1.17	%
Total	$	260,000	1.94	%	$	290,000	1.94	%


⁽¹⁾	Hedged advance (see "Derivative Instruments" section below)

Securities sold under agreements to repurchase are classified as secured borrowings and are reflected at the amount of cash received in connection with the transaction. The securities underlying the agreements have a carrying value and a fair value of $32,933 and $54,898 at March 31, 2018 and December 31, 2017, respectively. Such securities remain under our control. We may be required to provide additional collateral based on the fair value of underlying securities.

Securities sold under repurchase agreements without stated maturity dates, federal funds purchased, and FRB Discount Window advances generally mature within one to four days from the transaction date. The following table provides a summary of securities sold under repurchase agreements without stated maturity dates and federal funds purchased. We had no FRB Discount Window advances during the three month periods ended March 31, 2018 or 2017.



	Three Months Ended March 31
	2018						2017
	Maximum Month End Balance		Average Balance		Weighted Average Interest Rate During the Period		Maximum Month End Balance		Average Balance		Weighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates	$	38,967	$	35,995	0.10	%	$	58,088	$	57,505	0.13	%
Federal funds purchased	10,200		4,460		1.66	%	5,200		863		0.96	%

We had pledged AFS securities and 1-4 family residential real estate loans in the following amounts at:



	March 31 2018		December 31 2017
Pledged to secure borrowed funds	$	402,702	$	410,988
Pledged to secure repurchase agreements	32,933		54,898
Pledged for public deposits and for other purposes necessary or required by law	33,958		27,976
Total	$	469,593	$	493,862

AFS securities pledged to repurchase agreements without stated maturity dates consisted of the following at:



	March 31 2018		December 31 2017
States and political subdivisions	$	2,413	$	7,332
Mortgage-backed securities	9,192		13,199
Collateralized mortgage obligations	21,328		34,367
Total	$	32,933	$	54,898

AFS securities pledged to repurchase agreements are monitored to ensure the appropriate level is collateralized. In the event of maturities, calls, significant principal repayments, or significant decline in market values, we have adequate levels of AFS securities to pledge to satisfy required collateral.

As of March 31, 2018, we had the ability to borrow up to an additional $153,347, based on assets pledged as collateral. We had no investment securities that are restricted to be pledged for specific purposes.

Derivative Instruments

We enter into interest rate swaps to manage exposure to interest rate risk and variability in cash flows. The interest rate swaps, associated with our variable rate borrowings, are designated upon inception as cash flow hedges of forecasted interest payments. We enter into LIBOR-based interest rate swaps that involve the receipt of variable amounts in exchange for fixed rate payments, in effect converting variable rate debt to fixed rate debt.

Cash flow hedges are assessed for effectiveness using regression analysis. The effective portion of changes in fair value are recorded in OCI and subsequently reclassified into interest expense in the same period in which the related interest on the variable rate borrowings affects earnings. In the event that a portion of the changes in fair value were determined to be ineffective, the ineffective amount would be recorded in earnings.

The following tables provide information on derivatives related to variable rate borrowings as of:

March 31, 2018

Pay Rate

Receive Rate

Remaining Life (Years)

Notional Amount

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments

Cash Flow Hedges:

Interest rate swaps

1.56

3-Month LIBOR

3.1

10,000

Other Assets

413

December 31, 2017

Pay Rate

Receive Rate

Remaining Life (Years)

Notional Amount

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments

Cash Flow Hedges:

Interest rate swaps

1.56

3-Month LIBOR

3.3

10,000

Other Assets

291

Derivatives contain an element of credit risk which arises from the possibility that we will incur a loss as a result of a counterparty failing to meet its contractual obligations. Credit risk is minimized through counterparty collateral, transaction limits and monitoring procedures. We also manage dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements and counterparty limits. We do not anticipate any losses from failure of interest rate derivative counterparties to honor their obligations.