DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2011

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments And Hedging Activities Disclosure [Text Block]

NOTE O - DERIVATIVE FINANCIAL INSTRUMENTS

The Company may, at times, use derivative financial instruments to manage its interest rate risk. These instruments carry varying degrees of credit, interest rate, and market or liquidity risks. Derivative instruments are recognized as either assets or liabilities in the consolidated financial statements and are measured at fair value. Subsequent changes in the derivatives’ fair values are recognized in earnings unless specific hedge accounting criteria are met. The Predecessor Company entered into certain interest rate swap agreements as described below.

In August 2003, $8.0 million in TRUPs were issued through the Trust, which invested the total proceeds from the sale of its TRUPs in junior subordinated deferrable interest debentures issued by the Company, which fully and unconditionally guarantees the TRUPs. We adjusted these junior subordinated debentures to estimated fair value in purchase accounting with the Piedmont Investment, and at December 31, 2011, their carrying value was $5,437,000. The TRUPs pay cumulative cash distributions quarterly at an annual contract rate, reset quarterly, equal to three-month LIBOR plus 3.10%.

In June 2009, the Company entered into a derivative financial instrument which swapped the variable rate payments for fixed payments. These instruments consisted of a three-year and four-year swap, each for one-half of the notional amount of the TRUPs for fixed rates of 5.49% and 5.97%, respectively. Due to the deferral of interest payments on the TRUPs, the associated interest rate swaps no longer qualify for cash flow hedge accounting and are therefore marked to fair value through earnings. The impact to earnings related to the de-designation for the predecessor period of January 1 to November 18, 2011 and the successor period of November 19 to December 31, 2011 totaled $(16,512) and $9,400, respectively

On September 26, 2008, the Bank entered into an unsecured subordinated term loan agreement in the amount of $7.5 million. The agreement requires the Bank to make quarterly payments of interest at an annual contract rate, reset quarterly, equal to three-month LIBOR plus 4.00%. We adjusted the subordinated term loan to estimated fair value in purchase accounting with the Piedmont Investment, and at December 31, 2011, its carrying value was $6,778,901.

In June 2009, the Bank entered into a derivative financial instrument which swapped the variable rate payments for fixed payments. We entered into a three-year and four-year swap, each for one-half of the notional amount of the subordinated debt for fixed rates of 6.39% and 6.87%, respectively. At the Piedmont Investment, we no longer designated these interest rate swaps as qualifying for hedge accounting and therefore mark them to fair value through earnings. In relation to the acquisition, the associated interest rate swaps no longer qualify for cash flow hedge accounting and are therefore marked to fair value through earnings. The impact to earnings related to the de-designation for the successor period of November 19 to December 31, 2011 totaled $9,940.

The following table discloses the location and fair value amounts of outstanding derivative instruments at December 31, 2011 and 2010:

				Successor			Predecessor
				Company			Company
				2011			2010
	Balance Sheet	Notional		Estimated Fair			Estimated Fair
	Location	Amount		Value			Value
Trust preferred securities:
Interest rate swap	Other liabilities	$	4,000,000	$	(38,275	)	$	(111,444	)
Interest rate swap	Other liabilities		4,000,000		(134,029	)		(188,166	)
Subordinated term loan agreements:
Interest rate swap	Other liabilities		3,750,000		(34,160	)		(103,529	)
Interest rate swap	Other liabilities		3,750,000		(123,650	)		(175,899	)
		$	15,500,000	$	(330,114	)	$	(579,038	)

The following table discloses activity in accumulated OCI related to the interest rate swaps for the periods presented.

	Successor Company		Predecessor Company
	November 19		January 1
	to		to			Year ended
	December 31,		November 18,			December 31,
	2011		2011			2010
Accumulated OCI resulting from interest rate swaps as of the beginning of the period, net of tax	$	-	$	(355,818	)	$	(181,237	)
Other comprehensive (gain) loss recognized, net of tax		-		151,203			(174,581	)
Accumulated OCI resulting from interest rate swaps as of the end of the period, net of tax	$	-	$	(204,615	)	$	(355,818	)

The Company monitors the credit risk of the interest rate swap counterparty. The Company has pledged $780,000 in cash to the counterparty to the swaps.