pab bankshares, inc. - SNL Financial

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company’s derivative financial instruments as well as their
classification on the Balance Sheet as of December 31, 2009 and December 31, 2008.
Asset Derivatives
Liability Derivatives
As of December 31, 2009 As of December 31, 2008 As of December 31, 2009 As of December 31, 2008
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Derivatives designated as hedging instruments under FASB ASC 815:
Interest Rate
Products
Other
Assets $ -
Other
Assets $3,992,797
Other
Liabilities $ -
Other
Liabilities
$ -
Total derivatives designated
as hedging instruments under
FASB ASC 815 $ - $3,992,797 $ -
$ -
Derivatives not designated as hedging instruments under FASB ASC 815:
Interest Rate
Products
Other
Assets $13,757
Other
Assets $ -
Other
Other
Liabilities $ - Liabilities $ -
Total derivatives not
designated as hedging
instruments under FASB ASC
815 $13,757
$ - $ - $ -
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to
manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate
caps as part of its interest rate risk management strategy. For hedges of the Company’s variable-rate borrowings, an
interest rate cap is designated as cash flow hedge to protect the company against interest rate movements above the strike
rate of the cap in exchange for an upfront premium. Historically the company also has used interest rate collars and floors
as part of its interest rate risk management strategy. Interest rate collars designated as cash flow hedges involve the receipt
of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the purchased floor and the
payment of variable-rate amounts if interest rates rise above the cap rate on the sold cap. Interest rate floors designated as
cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate
on the contract in exchange for an up front premium.
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