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DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2013
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
(10) DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into oil and gas swaps and options contracts to accommodate the business needs of its customers. Upon the origination of an oil or gas swap or option contract with a customer, the Company simultaneously enters into an offsetting contract with a counterparty to mitigate the exposure to fluctuations in oil and gas prices. These derivatives are not designated as hedged instruments and are recorded on the Company’s consolidated balance sheet at fair value.

The Company utilizes dealer quotations and observable market data inputs to substantiate internal valuation models. The notional amounts and estimated fair values of oil and gas derivative positions outstanding are presented in the following table:

September 30, 2013

Oil and Natural Gas Swaps and Options

 Notional Units Notional
Amount		 Estimated
Fair Value
(Notional amounts and dollars in thousands)

Oil

Derivative assets

 Barrels 335 $ 1,665

Derivative liabilities

 Barrels (335 ) (1,178 )

Natural Gas

Derivative assets

 MMBTUs 2,962 1,384

Derivative liabilities

 MMBTUs (2,962 ) (708 )

Total Fair Value

 Included in

Derivative assets

 Other assets 3,049

Derivative liabilities

 Other liabilities (1,886 )

The following table is a summary of the Company’s recognized income related to the activity, which was included in other noninterest income:

Three Months Ended
September 30,		 Nine Months Ended
September 30,
2013 2012 2013 2012
(Dollars in thousands)

Derivative income

 $ 71 $ 205 $ 309 $ 555

The Company’s credit exposure on oil and gas swaps and options varies based on the current market prices of oil and natural gas. Other than credit risk, changes in the fair value of customer positions will be offset by equal and opposite changes in the counterparty positions. The net positive fair value of the contracts represents the profit derived from the activity and is unaffected by market price movements.

Customer credit exposure is managed by strict position limits and is primarily offset by first liens on production while the remainder is offset by cash. Counterparty credit exposure is managed by selecting highly rated counterparties (rated A- or better by Standard and Poor’s) and monitoring market information.

The following table is a summary of the Company’s net credit exposure relating to oil and gas swaps and options with bank counterparties:

September 30, 2013
(Dollars in thousands)

Credit exposure

 $ (149 )

Balance Sheet Offsetting

Derivatives may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements. The Company’s derivative transactions with upstream financial institution counterparties and bank customers are generally executed under International Swaps and Derivative Association (“ISDA”) master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset such financial instruments for financial reporting purposes.