Note 11 - Derivative Financial Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

11. Derivative Financial Instruments

At September 30, 2014, the Company’s derivative financial instruments consisted of interest rate swaps and at December 31, 2013, the Company’s derivative financial instruments consisted of purchased options and interest rate swaps. 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 interest rate swaps to mitigate the Company’s exposure to rising interest rates on its fixed rate loans.

The purchased options, which expired during the third quarter of 2014, were used to mitigate the Company’s exposure to rising interest rates on its financial liabilities without stated maturities.

At September 30, 2014 and December 31, 2013 derivatives with a combined notional amount of $18.0 million and $118.0 million, respectively, were not designated as hedges. Derivatives with a combined notional amount of $11.0 million and $11.2 million were designated as fair value hedges at September 30, 2014 and December 31, 2013, respectively. Changes in the fair value of the derivatives not designated as hedges are reflected in “Net gain/loss from fair value adjustments” in the Consolidated Statements of Income. The portion of the change in the fair value of the derivative designated as a fair value hedge which is considered ineffective are reflected in “Net gain/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 September 30, 2014:

	At or for the nine months ended September 30, 2014
	Notional  Amount		Purchase Price		Net Carrying (1) Value
	(In thousands)
Interest rate swaps (non-hedge)	$	18,000	$	-	$	(352	)
Interest rate swaps (hedge)		4,153		-		174
Interest rate swaps (hedge)		6,888		-		(183	)
Total derivatives	$	29,041	$	-	$	(361	)

(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.

The following table sets forth information regarding the Company’s derivative financial instruments at December 31, 2013:

	At or for the year ended December 31, 2013
	Notional  Amount		Purchase Price		Net Carrying (1) Value
	(In thousands)
Interest rate caps (non-hedge)	$	100,000	$	9,035	$	-
Interest rate swaps (non-hedge)		18,000		-		1,681
Interest rate swaps (hedge)		11,217		-		400
Total derivatives	$	129,217	$	9,035	$	2,081

(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.

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

	For the three months ended  September 30,						For the nine months ended  September 30,
(In thousands)	2014			2013			2014			2013
Financial Derivatives:
Interest rate caps (non-hedge)	$	-		$	(7	)	$	-		$	(18	)
Interest rate swaps (non-hedge)		(300	)		565			(2,033	)		2,882
Interest rate swaps (hedge)		(28	)		-			(89	)		16
Net Gain (loss) (1)	$	(328	)	$	558		$	(2,122	)	$	2,880

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