Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments

Derivative Financial Instruments

Note 18 — Derivative Financial Instruments

Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments. See Note 17 for further information.

The Company has certain interest rate derivative positions that are not designated as hedging instruments. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institution offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

At December 31, 2012 and 2011, the amounts of non-hedging derivative financial instruments are shown in the chart below:

			Asset derivatives			Liability derivatives
	Notional or		Statement of			Statement of
	contractual		Financial Condition	Fair		Financial Condition	Fair
(Dollars in thousands)	amount		classification	value		classification	value
Interest rate swap contracts	$	446,024	Other assets	$	16,126	Other liabilities	$	16,444
Loan commitments	33,961		Mortgages held for sale	220		N/A	—
Forward contracts	21,500		N/A	—		Mortgages held for sale	33
Total - December 31, 2012	$	501,485		$	16,346		$	16,477
Interest rate swap contracts	$	453,428	Other assets	$	17,496	Other liabilities	$	17,945
Loan commitments	38,209		Mortgages held for sale	189		N/A	—
Forward contracts	21,247		N/A	—		Mortgages held for sale	218
Total - December 31, 2011	$	512,884		$	17,685		$	18,163

At December 31, 2012, 2011 and 2010, the amounts included in the consolidated statements of income for non-hedging derivative financial instruments are shown in the chart below:

	Statement of	Gain (loss)
(Dollars in thousands)	Income classification	2012		2011			2010
Interest rate swap contracts	Other expense	$	131	$	57		$	61
Interest rate swap contracts	Other income	721		588			448
Loan commitments	Mortgage banking income	31		159			(47		)
Forward contracts	Mortgage banking income	185		(669		)	40
Total		$	1,068	$	135		$	502