Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVES

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DERIVATIVES
 9 Months Ended
Sep. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
NOTE 7 - DERIVATIVES
 
During 2008, the Company entered into an interest rate swap (“swap”) to facilitate the financing needs of a single customer. Upon entering into the swap, the Company entered into an offsetting position with a regional correspondent bank in order to minimize the risk to the Company. As of September 30, 2013, the notional amount of the swap with this customer was approximately $4.5 million while the notional amount of the swap with the correspondent bank was also approximately $4.5 million. The swap qualifies as a derivative, but is not designated as a hedging instrument. The Company has recorded the value of the swap at $194,000 in offsetting entries in other assets and other liabilities.
 
The Company has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of September 30, 2013 and December 31, 2012 were not material.