Derivatives and Hedging Activities

9 Months Ended

Sep. 30, 2012

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

The Company periodically enters into certain commercial loan interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rates. Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to a swap agreement. This swap agreement effectively converts the customer’s variable rate loan into a fixed rate. The Company then enters into a corresponding swap agreement with a third party in order to offset its exposure on the variable and fixed components of the customer agreement. As the interest rate swap agreements with the customers and third parties are not designated as hedges under the Derivatives and Hedging topic of the FASB ASC, the instruments are marked to market in earnings. The notional amount of open interest rate swap agreements at September 30, 2012 and December 31, 2011 was $164.3 million and $160.3 million, respectively. There was no impact to the statement of operations for the three or nine month periods ending September 30, 2012 and 2011.

The following table presents the fair value of derivatives not designated as hedging instruments at September 30, 2012 and December 31, 2011:

Asset Derivatives

Liability Derivatives

September 30, 2012

December 31, 2011

September 30, 2012

December 31, 2011

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

(in thousands)

Interest rate contracts

Other assets

$

16,375

Other assets

$

16,302

Other liabilities

$

16,375

Other liabilities

$

16,302