Note 10 - Derivative Financial Instruments

3 Months Ended

Mar. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Text Block]

10.           Derivative Financial Instruments

At March 31, 2012, the Company’s derivative financial instruments consist of purchased options and swaps. The purchased options are used to mitigate the Company’s exposure to rising interest rates on its financial liabilities without stated maturities. The Company’s swaps are used to mitigate the Company’s exposure to market value changes in its junior subordinated debentures with a contractual value of $60.9 million. 

These derivatives are not designated as hedges and have a combined notional amount of $118.0 million at March 31, 2012. Changes in the fair value of these derivatives are reflected in “net loss from fair value adjustments” in the Consolidated Statements of Income.

The following table sets forth information regarding the Company’s derivative financial instruments at March 31, 2012:

			March 31, 2012
	Notional				Cumulative Unrealized				Net Gain
	Amount		Purchase Price		Gain		Loss		(loss) Position (1)
			(In thousands)
Interest rate caps	$	100,000	$	9,035	$	-	$	8,827	$	208
Interest rate swaps		18,000		-		-		693		(693	)
Total derivatives	$	118,000	$	9,035	$	-	$	9,521	$	(486	)

(1) Derivatives in a net gain position are recorded as “Other assets” and derivatives in a net loss position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.  

The following table displays a summary of the terms of the interest rate caps and interest rate swaps currently held by the Savings Bank:

Interest Rate Cap 1

Interest Rate Cap 2

Interest Rate Swap 1

Interest Rate Swap 2

Interest Rate Swap 3

(Dollars in thousands)

Notional Amount

$

50,000

$

50,000

$

6,000

$

6,000

$

6,000

Trade Date

August 12, 2009

August 24, 2009

March 19, 2012

March 20, 2012

March 20, 2012

Effective Date

August 14, 2009

August 26, 2009

September 1, 2012

July 30, 2012

June 15, 2012

Fixed Rate Paid By Savings Bank

n/a

n/a

3.18

%

3.21

%

3.22

%

Adjustable rate paid by counterparty

3 month LIBOR

3 month LIBOR

3 month LIBOR

3 month LIBOR

3 month LIBOR

Strike price (3 month LIBOR)

1.47

%

1.47

%

n/a

n/a

n/a

Maturity Date

August 14, 2014

August 26, 2014

September 1, 2037

July 30, 2037

September 15, 2037

The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for the periods indicated:

	Three months ended March 31,
(In thousands)	2012			2011
Financial Derivatives:
Interest rate caps	$	(148	)	$	(31	)
Interest rate swaps		(693	)		-
Net gain (loss)	$	(841	)	$	(31	)