DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVEINSTRUMENTS

The Company utilizes derivative instruments to assist in the management of interest rate sensitivity by modifying the repricing, maturity and option characteristics of certain assets and liabilities. The following table summarizes derivative instruments held by the Company, their notional amount, estimated fair values and their location in the consolidated balance sheets at June 30, 2013 and December 31, 2012:

				Derivatives in Other Assets			Derivatives in Other Liabilities
	Notional Amount			Fair Value Gain (Loss)			Fair Value Loss
	June 30, 2013		December 31, 2012	June 30, 2013	December 31, 2012		June 30, 2013		December 31, 2012
	(dollars expressed in thousands)
Derivative Instruments Not Designated as Hedging Instruments:
Customer interest rate swap agreements	$	9,871	12,149	31	87		(31	)	(87	)
Interest rate lock commitments	38,384		59,932	68	1,837		—		—
Forward commitments to sell mortgage-backed securities	67,600		107,700	2,478	(305	)	—		—
Total	$	115,855	179,781	2,577	1,619		(31	)	(87	)

Customer Interest Rate Swap Agreements. First Bank offers interest rate swap agreements to certain customers to assist in hedging their risks of adverse changes in interest rates. First Bank serves as an intermediary between its customers and the financial markets. Each interest rate swap agreement between First Bank and its customers is offset by an interest rate swap agreement between First Bank and various counterparties. These interest rate swap agreements do not qualify for hedge accounting treatment. Changes in the fair value are recognized in noninterest income on a monthly basis. Each customer contract is paired with an offsetting contract, and as such, there is no significant impact to net income. The notional amount of these interest rate swap agreement contracts at June 30, 2013 and December 31, 2012 was $9.9 million and $12.1 million, respectively.

Interest Rate Lock Commitments / Forward Commitments to Sell Mortgage-Backed Securities. Derivative instruments issued by the Company consist of interest rate lock commitments to originate fixed-rate loans to be sold. Commitments to originate fixed-rate loans consist primarily of residential real estate loans. These net loan commitments and loans held for sale are hedged with forward contracts to sell mortgage-backed securities, which expire in September 2013. The fair value of the interest rate lock commitments, which is included in other assets in the consolidated balance sheets, was an unrealized gain of $68,000 and $1.8 million at June 30, 2013 and December 31, 2012, respectively. The fair value of the forward contracts to sell mortgage-backed securities, which is included in other assets in the consolidated balance sheets, was an unrealized gain of $2.5 million and an unrealized loss of $305,000 at June 30, 2013 and December 31, 2012, respectively. Changes in the fair value of interest rate lock commitments and forward commitments to sell mortgage-backed securities are recognized in noninterest income on a monthly basis.

The following table summarizes amounts included in the consolidated statements of operations for the three and six months ended June 30, 2013 and 2012 related to non-hedging derivative instruments:

Derivative Instruments Not Designated as Hedging Instruments:	Location of Gain (Loss) Recognized in Operations on Derivatives	Amount of Gain (Loss) Recognized in Operations on Derivatives
		Three Months Ended					Six Months Ended
		June 30,					June 30,
		2013			2012		2013		2012
		(dollars expressed in thousands)
Interest rate swap agreements	Other noninterest income	$	—		(2	)	—		(41	)
Customer interest rate swap agreements	Other noninterest income	—			—		—		3
Interest rate lock commitments	Gain on loans sold and held for sale	(1,047		)	1,582		(1,769	)	1,709
Forward commitments to sell mortgage-backed securities	Gain on loans sold and held for sale	2,543			(1,200	)	2,783		(428	)