Note 18 - Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Text Block]

18. Derivative Financial Instruments

At December 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 rising interest rates on a portion ($18.0 million) of its floating rate junior subordinated debentures that have a contractual value of $61.9 million. Additionally, the Company at times may use swaps to mitigate the Company’s exposure to rising interest rates on its fixed rate loans.

At December 31, 2012, derivatives with a combined notional amount of $118.0 million are not designated as hedges and a derivative with a notional amount of $4.3 million is designated as a fair value hedge. Changes in the fair value of the derivatives not designated as hedges are reflected in “Net loss from fair value adjustments” in the Consolidated Statements of Income.  The portions of the changes in the fair value of the derivative designated as a fair value hedge which is considered ineffective 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 December 31, 2012:

	At or for the year ended December 31, 2012
	Notional				Cumulative Realized				Net Carrying
	Amount		Purchase Price		Gain		Loss		Value(1)
	(In thousands)
Interest rate caps (non-hedge)	$	100,000	$	9,035	$	-	$	9,016	$	19
Interest rate swaps (non-hedge)		18,000		-		-		1,922		(1,922	)
Interest rate swaps (hedge)		4,300		-		-		5		3
Total derivatives	$	122,300	$	9,035	$	-	$	10,943	$	(1,900	)

(1) Derivatives in a net positive position are recorded as “Other assets” and derivatives in a net negative position are recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.  There were no unrealized losses on derivative financial instruments at December 31, 2012.

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

	For the year ended December 31,
(In thousands)	2012			2011			2010
Financial Derivatives:
Interest rate caps	$	(337	)	$	(2,153	)	$	(4,894	)
Interest rate swaps		(1,927	)		-			-
Net loss (1)	$	(2,264	)	$	(2,153	)	$	(4,894	)

(1) Net losses are recorded as “Net gain from fair value adjustments” in the Consolidated Statements of Income.