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Derivative Financial Instruments
9 Months Ended
Sep. 30, 2011
Derivative Instruments and Hedging Activities Disclosure [Abstract] 
Derivative Financial Instruments
Derivative Financial Instruments
In connection with its mortgage banking activities, the Corporation enters into commitments to originate fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sale or purchase of mortgage-backed securities to or from third-party investors to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price on a future date. Both the interest rate locks and the forward commitments are accounted for as derivative financial instruments and are carried at fair value, determined as the amount that would be necessary to settle each derivative financial instrument at the balance sheet date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Gross derivative assets and liabilities are recorded within other assets and other liabilities, respectively, on the consolidated balance sheets.
The following table presents a summary of the notional amounts and fair values of derivative financial instruments recorded on the consolidated balance sheets, none of which have been designated as hedging instruments:
 
September 30, 2011
 
December 31, 2010
 
Notional
Amount
 
Asset
(Liability)
Fair Value
 
Notional
Amount
 
Asset
(Liability)
Fair Value
 
(in thousands)
Interest Rate Locks with Customers:
 
 
 
 
 
 
 
Positive fair values
$
287,898

 
$
6,947

 
$
140,682

 
$
777

Negative fair values
3,154

 
(26
)
 
50,527

 
(760
)
Net Interest Rate Locks with Customers

 
6,921

 

 
17

Forward Commitments:
 
 
 
 
 
 
 
Positive fair values
5,180

 
5

 
558,861

 
8,479

Negative fair values
297,192

 
(5,643
)
 
—

 
—

Net Forward Commitments

 
(5,638
)
 

 
8,479

Net derivative fair value asset
 
 
$
1,283

 
 
 
$
8,496



The following table presents a summary of the fair value gains and losses on derivative financial instruments for the three and nine months ended September 30:
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
 
2011
 
2010
 
2011
 
2010
 
(in thousands)
Interest rate locks with customers
$
4,902

 
$
3,764

 
$
6,904

 
$
6,285

Forward commitments
(4,794
)
 
2,005

 
(14,117
)
 
(4,171
)
Fair value gains (losses) on derivative financial instruments
$
108

 
$
5,769

 
$
(7,213
)
 
$
2,114


Fair value gains and losses represent the changes in the fair values of derivative financial instruments during the period and are recognized on the consolidated statements of income as components of mortgage banking income. The other components of mortgage banking income are gains and losses on sales of mortgage loans, fair value adjustments on mortgage loans held for sale, gains and losses on the settlement of forward commitments, and net servicing income.