Derivatives and Hedging Activities

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Note 5. Derivatives and Hedging Activities

As of September 30, 2013, the Company’s interest rate swap derivative financial instruments were designated as cash flow hedges and are summarized as follows:

(Dollars in thousands)	Forecasted Notional  Amount		Variable Interest Rate 1	Fixed Interest Rate 1		Term 2
Interest rate swap	$	160,000	3 month LIBOR	3.378	%	Oct. 21, 2014 - Oct. 21, 2021
Interest rate swap	100,000		3 month LIBOR	2.498	%	Nov 30, 2015 - Nov. 30, 2022

__________

¹The Company pays the fixed interest rate and the counterparties pay the Company the variable interest rate.

²No cash will be exchanged prior to the term.

The hedging strategy converts the LIBOR based variable interest rate on forecasted borrowings to a fixed interest rate, thereby protecting the Company from floating interest rate variability.

The following table summarizes the fair value of the Company’s interest rate swap derivative financial instruments:

		Fair Value
(Dollars in thousands)	Balance Sheet Location	September 30, 2013		December 31, 2012
Interest rate swaps	Other liabilities	$	2,004	16,832

Pursuant to the interest rate swap agreements, the Company pledged collateral to the counterparties in the form of investment securities totaling $7,856,000 at September 30, 2013. There was $0 collateral pledged from the counterparties to the Company as of September 30, 2013. There is the possibility that the Company may need to pledge additional collateral in the future if there were further declines in the fair value of the interest rate swap derivative financial instruments versus the collateral pledged.