INTEREST RATE CONTRACTS
|12 Months Ended|
Dec. 31, 2011
|INTEREST RATE CONTRACTS|
NOTE 17 – INTEREST RATE CONTRACTS
As a result of loans acquired through the Integra Bank transaction in the fourth quarter of 2009, the Bank initiated an interest rate protection program in which the Bank earns a fee by providing the Bank’s commercial loan customers the ability to swap from variable to fixed, or fixed to variable interest rates. Under these agreements the Bank enters into a variable or fixed rate loan agreement with its customer in addition to a swap agreement. The swap agreement effectively swaps the customer’s variable rate to a fixed rate or vice versa. The Bank then enters into a corresponding swap agreement with a third party in order to swap its exposure on the variable to fixed rate swap with the Bank’s customer. Since the swaps are structured to offset each other, changes in fair values, while recorded, have no material net earnings impact. The notional amount of interest rate swaps at December 31, 2011 was $30,871 and $10,701 on December 31, 2010 with maturities ranging from one to seven years. The current fair value of these swaps was $1,349 and $716 at December 31, 2011 and 2010, respectively, and is included in other assets and other liabilities for the value of each of the swaps.
The Bank is exposed to losses if a counterparty fails to make its payments under a contract in which the Bank is in the receiving status. Although collateral or other security is not obtained, as the Bank is not currently in the receiving status, we minimize our credit risk by monitoring the credit standing of the counterparties. We anticipate the counterparties will be able to fully satisfy their obligations under these agreements.
Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, and any other contractual agreement to repay funds (including capital and operating leases), and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants, and contractual obligation disclosures, as applicable.
No definition available.