pab bankshares, inc. - SNL Financial

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
Non-designated Hedges
The Company does not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are
used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict
hedge accounting requirements of FASB ASC 815. Changes in the fair value of derivatives not designated in hedging
relationships are recorded directly in earnings. As of December 31, 2009 the Company had one outstanding derivative, a
$25 million dollar notional cap, which failed to qualify for hedge accounting as of September 30, 2009 due to a mismatch
between the cap notional and the money market account balances being hedged. Subsequently, the changes in fair value of
the cap from June 30, 2009 through December 31, 2009 were recognized directly in earnings which resulted in a loss for
the period of $15,074.
During the quarter ended June 30, 2009 the Company terminated a $25 million notional collar that failed to qualify for
hedge accounting; accordingly, the changes in fair value of the collar during the six months ended June 30, 2009 of
$137,150 has been recognized directly in earnings as a loss.
Effect of Derivative Instruments on the Income Statement (Continued)
Derivatives Not Designated
as Hedging Instruments
Under FASB ASC 815
Amount of Gain or (Loss) Recognized
in Income on Derivative
Location of Gain or
Twelve Months Ended
(Loss) Recognized in
December 31,
Income on Derivative 2009
2008
Interest Rate Products Other Income / Expense $ (152,224)
$ -
Total $ (152,224) $ -
92