Derivatives and Hedging Activities

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND HEDGING ACTIVITIES

NOTE 6–DERIVATIVES AND HEDGING ACTIVITIES:

The Company uses derivatives to manage exposure to market risk, interest rate risk and to assist customers with their risk management objectives. Derivative transactions are measured in terms of notional amount, which is not recorded on the consolidated statements of financial condition. The notional amount is generally not exchanged and is used as the basis for which interest and other payments are determined. All derivatives are recorded within other assets or liabilities and carried at fair value, with changes in fair value reflected in current period earnings. At September 30, 2012 the Company did not hold any cash flow or foreign currency hedge instruments.

For further information on the policies that govern derivative and hedging activities, see Note 11, Derivatives and Hedging Activities to the Consolidated Financial Statements within the 2011 Annual Report on Form 10-K.

The notional amounts and fair values for derivatives consist of the following.

September 30, 2012	Notional Amount		Fair Value Derivatives
(in thousands)			Asset		Liability
Forward sale commitments	$	1,264,124	$	1,584	$	(16,305	)
Interest rate swaptions	135,000		—		—
Interest rate lock commitments	922,639		37,413		(1		)
Interest rate swaps	449,354		4,785		(8,626		)
Total derivatives	$	2,771,117	$	43,782	$	(24,932	)

December 31, 2011	Notional Amount		Fair Value Derivatives
			Asset		Liability
Forward sale commitments	$	428,803	$	1,206	$	(2,223	)
Interest rate swaptions	110,000		1		—
Interest rate lock commitments	244,138		6,836		—
Interest rate swaps	337,705		5,719		(8,777		)
Total derivatives	$	1,120,646	$	13,762	$	(11,000	)

The ineffective portion of net gains (losses) on derivatives in fair value hedging relationships, recognized in other noninterest income on the consolidated statements of operations, for loans held for investment were $16 thousand and $(92) thousand for the three months ended September 30, 2012 and 2011, respectively and $64 thousand and $(26) thousand for the nine months ended September 30, 2012 and 2011, respectively.

The following table shows the net gains (losses) recognized on economic hedge derivatives within the respective line items in the statement of operations for the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2012		2011		2012		2011
Recognized in noninterest income:
Net gain (loss) on mortgage loan origination and sale activities (1)	$	891	$	2,041	$	11,456	$	(1,941	)
Mortgage servicing (2)	4,861		38,335		24,600		45,521
	$	5,752	$	40,376	$	36,056	$	43,580

(1) Comprised of mortgage loan interest rate lock commitments and forward contracts used as an economic hedge on loans held for sale.

(2) Comprised of interest rate swaps, interest rate swaptions and forward contracts used as an economic hedge of mortgage servicing rights.