DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 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 September 30, 2013 and December 31, 2012:

				Derivatives in Other Assets				Derivatives in Other Liabilities
	Notional Amount			Fair Value Gain (Loss)				Fair Value Loss
	September 30, 2013		December 31, 2012	September 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
	(dollars expressed in thousands)
Derivative Instruments Not Designated as Hedging Instruments:
Customer interest rate swap agreements	$	8,731	12,149	7		87		(7	)	(87	)
Interest rate lock commitments	27,118		59,932	743		1,837		—		—
Forward commitments to sell mortgage-backed securities	39,300		107,700	(637	)	(305	)	—		—
Total	$	75,149	179,781	113		1,619		(7	)	(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 September 30, 2013 and December 31, 2012 was $8.7 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 December 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 $743,000 and $1.8 million at September 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 loss of $637,000 and $305,000 at September 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 nine months ended September 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					Nine Months Ended
		September 30,					September 30,
		2013			2012		2013		2012
		(dollars expressed in thousands)
Interest rate swap agreements	Other noninterest income	$	—		(8	)	—		(49	)
Customer interest rate swap agreements	Other noninterest income	—			—		—		3
Interest rate lock commitments	Gain on loans sold and held for sale	675			1,192		(1,094	)	2,901
Forward commitments to sell mortgage-backed securities	Gain on loans sold and held for sale	(3,115		)	(1,165	)	(332	)	(1,593	)