DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

9 Months Ended

Sep. 30, 2012

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Schedule of interest rate swap agreements and non-hedging derivative assets and liabilities

Information about interest rate swap agreements and non-hedging derivative assets and liabilities at September 30, 2012, follows:

			Weighted					Estimated
	Notional		Average	Weighted Average Rate				Fair Value
	Amount		Maturity	Received		Paid		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Interest rate swaps on FHLBB borrowings	$	115,000	1.8	0.44	%	3.47	%	$	(5,509	)
Forward-starting interest rate swaps on FHLBB borrowings	140,000		5.7	—	%	2.37	%	(5,920		)
Interest rate swaps on junior subordinated debentures	15,000		1.6	2.28	%	5.54	%	(829		)
Total cash flow hedges	270,000							(12,258		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	13,734		17.2	0.60	%	5.09	%	(3,719		)
Interest rate swaps on loans with commercial loan customers	198,600		5.2	2.58	%	5.35	%	(16,290		)
Reverse interest rate swaps on loans with commercial loan customers	198,600		5.2	5.35	%	2.58	%	15,747
Forward commitments	330,632		0.2					(4,669		)
Total economic hedges	741,566							(8,931		)
Non-hedging derivatives:
Interest rate lock commitments	275,756		0.2					7,833
Total non-hedging derivatives	275,756							7,833
Total	$	1,287,322						$	(13,356	)

Information about interest rate swap agreements and non-hedging derivative assets and liabilities at December 31, 2011, follows:

			Weighted					Estimated
	Notional		Average	Weighted Average Rate				Fair Value
	Amount		Maturity	Received		Paid		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Interest rate swaps on FHLBB borrowings	$	105,000	1.7	0.49	%	4.00	%	$	(5,888	)
Forward-starting interest rate swaps on FHLBB borrowings	80,000		3.5	—		2.56	%	(2,064		)
Interest rate swaps on junior subordinated debentures	15,000		2.4	2.35	%	5.54	%	(1,055		)
Total cash flow hedges	200,000							(9,007		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	14,096		17.9	0.64	%	5.09	%	(3,505		)
Interest rate swaps on loans with commercial loan customers	160,389		5.6	2.73	%	5.77	%	(14,351		)
Reverse interest rate swaps on loans with commercial loan customers	160,389		5.6	5.77	%	2.73	%	13,871
Forward commitments	21,538		0.2					55
Total economic hedges	356,412							(3,930		)
Non-hedging derivatives:
Interest rate lock commitments	21,538		0.2					(66		)
Total non-hedging derivatives	21,538							(66		)
Total	$	577,950						$	(13,003	)

Schedule of amounts included in the consolidated statements of income and in the other comprehensive income section of the consolidated statements of changes in stockholders' equity

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2012			2011			2012			2011
Interest rate swaps on FHLBB borrowings:
Unrealized (loss) gain recognized in accumulated other comprehensive loss	$	(1,086	)	$	(987	)	$	(3,446	)	$	(544	)
Reclassification of unrealized loss from accumulated other comprehensive loss to non-interest income for hedge ineffectiveness	11			11			31			31
Reclassification of realized gain from accumulated other comprehensive loss to other non-interest income for termination of swaps	235			235			706			706
Reclassification of unrealized deferred tax benefit from accumulated other comprehensive loss to tax expense for terminated swaps	(98		)	(98		)	(226		)	(293		)
Net tax benefit (expense) on items recognized in accumulated other comprehensive loss	441			407			1,448			210
Interest rate swaps on junior subordinated debentures:
Unrealized gain (loss) recognized in accumulated other comprehensive loss	71			(65		)	226			(62		)
Net tax (expense) benefit on items recognized in accumulated other comprehensive loss	(28		)	27			(89		)	24
Other comprehensive income recorded in accumulated other comprehensive loss, net of reclassification adjustments and tax effects	$	(454	)	$	(470	)	$	(1,350	)	$	72
Net interest expense recognized in interest expense on hedged FHLBB borrowings	$	1,121		$	1,239		$	3,327		$	3,663
Net interest expense recognized in interest expense on junior subordinated debentures	$	148		$	131		$	363		$	386

Schedule of amounts included in the consolidated statements of income related to economic hedges and non-hedging derivatives

	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
(In thousands)	2012			2011			2012			2011
Economic hedges
Interest rate swap on industrial revenue bond:
Net interest expense recognized in interest and dividend income on securities	$	(158	)	$	(1,812	)	$	(473	)	$	(2,137	)
Unrealized gain recognized in other non-interest income	(24		)	—			(1,118		)	(69		)
Interest rate swaps on loans with commercial loan customers:
Unrealized gain recognized in other non-interest income	859			6,133			4,119			7,073
Reverse interest rate swaps on loans with commercial loan customers:
Unrealized loss recognized in other non-interest income	(859		)	(6,133		)	(4,119		)	(7,073		)
Favorable (unfavorable) change in credit valuation adjustment recognized in other non-interest income	$	(31	)	$	(281	)	$	(22	)	$	(464	)
Forward commitments
Unrealized loss recognized in other non-interest income	$	(6,832	)	$	(182	)	$	(8,963	)	$	(292	)
Non-hedging derivatives
Interest rate lock commitments
Unrealized gain recognized in other non-interest income	$	10,858		$	182		$	15,195		$	256