Derivatives and Balance Sheet Offsetting

3 Months Ended

Mar. 31, 2014

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivatives and Hedging Activities

Derivatives and Balance Sheet Offsetting

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 March 31, 2014 and December 31, 2013 was $186.9 million and $179.5 million, respectively. There was no impact to the statement of income for the three month periods ending March 31, 2014 and 2013.

The following table presents the fair value of derivatives not designated as hedging instruments at March 31, 2014 and December 31, 2013:

Asset Derivatives

Liability Derivatives

March 31, 2014

December 31, 2013

March 31, 2014

December 31, 2013

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

$

9,418

Other assets

$

9,044

Other liabilities

$

9,418

Other liabilities

$

9,044