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Derivative Instruments
 12 Months Ended
Dec. 31, 2012
Derivative instruments and hedging activities disclosure abstract  
Derivative Instruments And Hedging Activities Disclosure Text Block

NOTE 15: DERIVATIVE INSTRUMENTS

 

Financial derivatives are reported at fair value in other assets or other liabilities. The accounting for changes in the fair value of a derivative depends on whether it has been designated and qualifies as part of a hedging relationship. For derivatives not designated as part of a hedging relationship, the gain or loss is recognized in current earnings. From time to time, the Company may enter into interest rate swaps (“swaps”) to facilitate customer transactions and meet their financing needs. Upon entering into these instruments to meet customer needs, the Company enters into offsetting positions in order to minimize the risk to the Company. These swaps qualify as derivatives, but are not designated as hedging instruments. At December 31, 2012, the Company had no derivative contracts to assist in managing its interest rate sensitivity.

 

Interest rate swap contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty or customer owes the Company, and results in credit risk to the Company. When the fair value of a derivative instrument contract is negative, the Company owes the customer or counterparty and therefore, has no credit risk.

 

A summary of the Company's interest rate swaps as of and for the years ended December 31, 2012 and 2011 is presented below.

          Other
     Other Other  noninterest
     Assets Liabilities  income
     Estimated Estimated  Gains
(Dollars in thousands) Notional Fair Value Fair Value   (Losses)
December 31, 2012:         
Pay fixed / receive variable$ 5,367  —  1,210 $ 115
Pay variable / receive fixed  5,367  1,210  —   (115)
 Total interest rate swap agreements$ 10,734  1,210  1,210 $ —
December 31, 2011:         
Pay fixed / receive variable$ 5,717  —  1,325 $ (224)
Pay variable / receive fixed  5,717  1,325  —   224
 Total interest rate swap agreements$ 11,434  1,325  1,325 $ —