12. DERIVATIVES

The Company utilized interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

An interest rate swap with a notional amount totaling $15.0 million was entered into on June 28, 2012 and was designated as a cash flow hedge of certain Federal Home Loan Bank advances. The swap was determined to be fully effective during the period presented and therefore no amount of ineffectiveness has been included in net income. The aggregate fair value of the swap is recorded in other assets with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings if the hedge transaction becomes probable of not occurring. The Company expects the hedges to remain fully effective during the remaining term of the swap.

The following table presents summary information about the interest rate swap designated as a cash flow hedge as of March 31, 2013 and December 31, 2012. The Company did not have an interest rate swap agreement as of March 31, 2012.

	For the three months ended			For the year ended
(Dollars in thousands)	March 31, 2013			December 31, 2012
Notional amounts	$	15,000		$	15,000
Weighted average pay rates	0.99		%	0.99		%
Weighted average receive rates	0.28		%	0.31		%
Weighted average maturity	4.24 years			4.49 years
Unrealized gains (losses)	$	(148	)	$	(176	)

Interest expense recorded on this swap transaction totaled $25,000 for the three months ended March 31, 2013 and is reported as a component of interest expense on FHLB Advances.

Cash Flow Hedge

The following table presents the net gains (losses) recorded, net of tax, in accumulated other comprehensive income and the Consolidated Statements of Income relating to the cash flow derivative instruments for the three months ended March 31, 2013.

	2013
(In thousands)	Amount of gain (loss) recognized in OCI (Effective Portion)			Amount of gain (loss) reclassified from OCI to interest income		Amount of gain (loss) recognized in other non interest income (Ineffective Portion)

Interest rate contracts	$	(89	)	$	—	$	—

The following table reflects the cash flow hedge included in the Consolidated Balance Sheet:

March 31, 2013

December 31, 2012

Notional

Fair

Notional

Fair

(In thousands)

Amount

Value

Amount

Value

Included in other liabilities:

Interest rate swap related to FHLB Advance

15,000

(148

)

15,000

(176

)