Derivative Financial Instruments

3 Months Ended

Mar. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. Both the interest rate locks and the forward commitments are accounted for as derivative financial instruments and are carried at fair value, determined as the amount that would be necessary to settle each derivative financial instrument at the balance sheet date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Gross derivative assets and liabilities are recorded within other assets and other liabilities, respectively, on the consolidated balance sheets, with changes in fair value during the period recorded within mortgage banking income on the consolidated statements of income. The other components of mortgage banking income are gains and losses on sales of mortgage loans, fair value adjustments on mortgage loans held for sale and servicing income, net of MSR amortization.

The following table presents a summary of the notional amounts and fair values of derivative financial instruments:

	March 31, 2012					December 31, 2011
	Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value
	(in thousands)
Interest Rate Locks with Customers:
Positive fair values	$	348,992	$	4,717		$	181,583	$	3,888
Negative fair values	3,968		(30		)	1,593		(10		)
Net interest rate locks with customers			4,687					3,878
Forward Commitments:
Positive fair values	307,865		733			3,178		13
Negative fair values	46,956		(98		)	173,208		(2,724		)
Net forward commitments			635					(2,711		)
Net derivative fair value asset			$	5,322				$	1,167

The following table presents a summary of the fair value gains and losses on derivative financial instruments for the three months ended March 31:

	2012		2011
	(in thousands)
Interest rate locks with customers	$	809	$	1,920
Forward commitments	3,346		(9,285		)
Fair value gains (losses) on derivative financial instruments	$	4,155	$	(7,365	)