The operations of the Corporation are subject to interest rate fluctuations to the extent that interest-earning assets and interest-bearing liabilities mature or reprice at different times or in different amounts. As part of the interest rate risk management, the Corporation has entered into a series of interest rate swap agreements. Under the interest rate swaps, the Corporation agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calcu- lated by reference to an agreed notional principal amount. Net interest settlements on interest rate swaps are recorded as an adjustment to inter- est expense on deposit accounts or interest income on investment accounts. The following table indicates the types of swaps used: Interest rate risk management Pay-fixed swaps: Balance at December 31, 1999 $ 50,000 Expired contracts  (50,000 Balance at December 31, 2000 0 New contracts 58,165 Balance at December 31, 2001 $ 58,165 Receive-fixed swaps: Balance at December 31, 1999 $ 185,000 Expired contracts (25,000 New contracts 991,000 Balance at December 31, 2000 1,151,000 Expired contracts (1,116,000 New contracts 1,460,000 Balance at December 31, 2001 $1,495,000 Notional amount  (In thousands) ) ) ) Interest rate swap agreements under which the Corporation agrees to pay variable-rates of interest are considered to be a hedge against changes in the fair value of the Corporation fixed-rate certificates of deposit. The interest rate swap agreements are reflected at fair value in the Corporation’s consolidated statement of financial condition and the relat- ed portion of fixed-rate debt being hedged is reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligations attributable to the interest rate risk being hedged.The hedge relationship is estimated to be 100 percent effec- tive; therefore, there is no impact on the statement of income nor on com- prehensive income, because the gain or loss on the swap agreements will completely offset the loss or gain on the certificates of deposit. The net effect of this accounting is that the interest expense on the hedged certifi- cates of deposit generally reflects variable interest rates. Interest rate swap agreements under which the Corporation agrees to pay fixed-rates of interest are considered to be a hedge against changes in the fair value attributable to market interest rates of fixed rate available for sale corporate bonds. Accordingly, the interest rate swap agreements and the securities being hedged are reflected at fair value in the Corporation’s con- solidated statement of financial condition. The adjustment of the hedged item’s carrying amount attributable to the hedged risk is recorded in earn- ings in order to offset the gain or loss on the hedging instrument. The change in the fair value of the security attributable to credit risk is record- ed in other comprehensive income. The hedge relationship is estimated to be 100 percent effective; therefore, there is no impact on the statement of income, because the gain or loss on the interest rate swap reflects the full amount of the gain or loss on the hedged item attributable to the hedged risk. The net effect of this accounting is that the interest of the fixed-rate securities being hedged generally reflects variable interest rates. 0 76 First BanCorp.> 2001