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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments The fair value of derivative positions outstanding is included in accrued interest receivable and other assets and accrued interest payable and other liabilities in the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows. Interest Rate Derivatives. We utilize interest rate swaps, caps and floors to mitigate exposure to interest rate risk and to facilitate the needs of our customers. Our objectives for utilizing these derivative instruments is described below: We have entered into certain interest rate swap contracts that are matched to specific fixed-rate commercial loans or leases that we have entered into with our customers. These contracts have been designated as hedging instruments to hedge the risk of changes in the fair value of the underlying commercial loan/lease due to changes in interest rates. The related contracts are structured so that the notional amounts reduce over time to generally match the expected amortization of the underlying loan/lease. During 2007, we entered into three interest rate swap contracts on variable-rate loans with a total notional amount of $1.2 billion. The interest rate swap contracts were designated as hedging instruments in cash flow hedges with the objective of protecting the overall cash flows from our monthly interest receipts on a rolling portfolio of $1.2 billion of variable-rate loans outstanding throughout the 84-month period beginning in October 2007 and ending in October 2014 from the risk of variability of those cash flows such that the yield on the underlying loans would remain constant. As more fully discussed in the 2014 Form 10-K, we terminated portions of the hedges and settled portions of the interest rate swap contracts during November 2009 and terminated the remaining portions of the hedges and settled the remaining portions of the interest rate swap contracts during November 2010. The accumulated gain on the interest rate swaps upon settlement was deferred and amortized over the original lives of the underlying swap contracts. The amortization of the deferred accumulated gain ended in October 2014. As of September 30, 2014, the deferred accumulated gain applicable to the settled interest rate swap contracts included in accumulated other comprehensive income totaled $2.6 million ($1.7 million on an after-tax basis), all of which was recognized in interest income during 2014. We have entered into certain interest rate swap, cap and floor contracts that are not designated as hedging instruments. These derivative contracts relate to transactions in which we enter into an interest rate swap, cap and/or floor with a customer while at the same time entering into an offsetting interest rate swap, cap and/or floor with a third party financial institution. In connection with each swap transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay a third-party financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to effectively convert a variable rate loan to a fixed rate. Because we act as an intermediary for our customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact our results of operations. The notional amounts and estimated fair values of interest rate derivative contracts are presented in the following table. We obtain dealer quotations to value any outstanding interest rate derivative contracts designated as hedges of cash flows, while the fair values of other interest rate derivative contracts are estimated utilizing internal valuation models with observable market data inputs.
| September 30, 2015 |  | December 31, 2014
| Notional Amount |  | Estimated Fair Value |  | Notional Amount |  | Estimated Fair Value
Derivatives designated as hedges of fair value: |  |  |  |  |  |  |
Financial institution counterparties: |  |  |  |  |  |  |
Loan/lease interest rate swaps – assets | $ | 6,583 |  |  | $ | 15 |  |  | $ | 31,614 |  |  | $ | 469 |
Loan/lease interest rate swaps – liabilities | 77,298 |  |  | (2,912 | ) |  | 37,672 |  |  | (3,179 | )
Non-hedging interest rate derivatives: |  |  |  |  |  |  |
Financial institution counterparties: |  |  |  |  |  |  |
Loan/lease interest rate swaps – assets | — |  |  | — |  |  | 69,842 |  |  | 719 |
Loan/lease interest rate swaps – liabilities | 839,394 |  |  | (47,129 | ) |  | 765,979 |  |  | (38,952 | )
Loan/lease interest rate caps – assets | 74,281 |  |  | 878 |  |  | 73,058 |  |  | 1,003 |
Customer counterparties: |  |  |  |  |  |  |
Loan/lease interest rate swaps – assets | 839,394 |  |  | 47,129 |  |  | 765,979 |  |  | 38,910 |
Loan/lease interest rate swaps – liabilities | — |  |  | — |  |  | 69,842 |  |  | (719 | )
Loan/lease interest rate caps – liabilities | 74,281 |  |  | (878 | ) |  | 73,058 |  |  | (1,003 | )
The weighted-average rates paid and received for interest rate swaps outstanding at September 30, 2015 were as follows:
| Weighted-Average
| Interest Rate Paid |  | Interest Rate Received
Interest rate swaps: |  |  |
Fair value hedge loan/lease interest rate swaps | 2.35 | % |  | 0.19 | %
Non-hedging interest rate swaps – financial institution counterparties | 4.03 | % |  | 1.86 | %
Non-hedging interest rate swaps – customer counterparties | 1.86 | % |  | 4.03 | %
The weighted-average strike rate for outstanding interest rate caps was 2.42% at September 30, 2015. Commodity Derivatives. We enter into commodity swaps and option contracts that are not designated as hedging instruments primarily to accommodate the business needs of our customers. Upon the origination of a commodity swap or option contract with a customer, we simultaneously enter into an offsetting contract with a third party financial institution to mitigate the exposure to fluctuations in commodity prices. The notional amounts and estimated fair values of non-hedging commodity swap and option derivative positions outstanding are presented in the following table. We obtain dealer quotations and use internal valuation models with observable market data inputs to value our commodity derivative positions.
|  |  | September 30, 2015 |  | December 31, 2014
| Notional Units |  | Notional Amount |  | Estimated Fair Value |  | Notional Amount |  | Estimated Fair Value
Financial institution counterparties: |  |  |  |  |  |  |  |  |
Oil – assets | Barrels |  | 513 |  |  | $ | 10,110 |  |  | 470 |  |  | $ | 14,357 |
Oil – liabilities | Barrels |  | 363 |  |  | (811 | ) |  | 197 |  |  | (1,670 | )
Natural gas – assets | MMBTUs |  | 4,366 |  |  | 5,029 |  |  | 12,235 |  |  | 12,707 |
Natural gas – liabilities | MMBTUs |  | 3,996 |  |  | (1,420 | ) |  | 16,755 |  |  | (4,095 | )
Customer counterparties: |  |  |  |  |  |  |  |  |
Oil – assets | Barrels |  | 363 |  |  | 811 |  |  | 197 |  |  | 1,670 |
Oil – liabilities | Barrels |  | 513 |  |  | (10,090 | ) |  | 470 |  |  | (14,318 | )
Natural gas – assets | MMBTUs |  | 3,996 |  |  | 1,420 |  |  | 16,755 |  |  | 4,095 |
Natural gas – liabilities | MMBTUs |  | 4,366 |  |  | (4,993 | ) |  | 12,235 |  |  | (12,646 | )
Foreign Currency Derivatives. We enter into foreign currency forward contracts that are not designated as hedging instruments primarily to accommodate the business needs of our customers. Upon the origination of a foreign currency denominated transaction with a customer, we simultaneously enter into an offsetting contract with a third party financial institution to negate the exposure to fluctuations in foreign currency exchange rates. We also utilize foreign currency forward contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in foreign currency exchange rates on foreign currency holdings and certain short-term, non-U.S. dollar denominated loans. The notional amounts and fair values of open foreign currency forward contracts were as follows:
|  |  | September 30, 2015 |  | December 31, 2014
| Notional Currency |  | Notional Amount |  | Estimated Fair Value |  | Notional Amount |  | Estimated Fair Value
Financial institution counterparties: |  |  |  |  |  |  |  |  |
Forward contracts - assets | EUR |  | 857 |  |  | $ | 2 |  |  | 936 |  |  | $ | 7 |
Forward contracts - assets | CAD |  | — |  |  | — |  |  | 24,724 |  |  | 659 |
Forward contracts - assets | GBP |  | 532 |  |  | 2 |  |  | — |  |  | — |
Forward contracts - liabilities | EUR |  | 572 |  |  | (1 | ) |  | — |  |  | — |
Forward contracts - liabilities | CAD |  | 2,985 |  |  | (18 | ) |  | — |  |  | — |
Forward contracts - liabilities | GBP |  | — |  |  | — |  |  | 544 |  |  | (2 | )
Customer counterparties: |  |  |  |  |  |  |  |  |
Forward contracts - assets | EUR |  | 575 |  |  | 5 |  |  | — |  |  | — |
Forward contracts - assets | CAD |  | 2,980 |  |  | 24 |  |  | — |  |  | — |
Forward contracts - liabilities | EUR |  | 15 |  |  | — |  |  | — |  |  | — |
Forward contracts - liabilities | CAD |  | — |  |  | — |  |  | 24,680 |  |  | (615 | )
Gains, Losses and Derivative Cash Flows. For fair value hedges, the changes in the fair value of both the derivative hedging instrument and the hedged item are included in other non-interest income or other non-interest expense. The extent that such changes in fair value do not offset represents hedge ineffectiveness. Net cash flows from interest rate swaps on commercial loans/leases designated as hedging instruments in effective hedges of fair value are included in interest income on loans. For cash flow hedges, the effective portion of the gain or loss due to changes in the fair value of the derivative hedging instrument is included in other comprehensive income, while the ineffective portion (indicated by the excess of the cumulative change in the fair value of the derivative over that which is necessary to offset the cumulative change in expected future cash flows on the hedge transaction) is included in other non-interest income or other non-interest expense. Net cash flows from interest rate swaps on variable-rate loans designated as hedging instruments in effective hedges of cash flows and the reclassification from other comprehensive income of deferred gains associated with the termination of those hedges are included in interest income on loans. For non-hedging derivative instruments, gains and losses due to changes in fair value and all cash flows are included in other non-interest income and other non-interest expense. Amounts included in the consolidated statements of income related to interest rate derivatives designated as hedges of fair value were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Commercial loan/lease interest rate swaps: |  |  |  |  |  |  |
Amount of gain (loss) included in interest income on loans | $ | (462 | ) |  | $ | (493 | ) |  | $ | (1,350 | ) |  | $ | (1,548 | )
Amount of (gain) loss included in other non-interest expense | — |  |  | 12 |  |  | 6 |  |  | 12 |
Amounts included in the consolidated statements of income and in other comprehensive income for the period related to interest rate derivatives designated as hedges of cash flows were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Interest rate swaps/caps/floors on variable-rate loans: |  |  |  |  |  |  |
Amount reclassified from accumulated other comprehensive income to interest income on loans | $ | — |  |  | $ | 9,345 |  |  | $ | — |  |  | $ | 28,035 |
No ineffectiveness related to interest rate derivatives designated as hedges of cash flows was recognized in the consolidated statements of income during the reported periods. The amortization of the deferred accumulated gain applicable to settled interest rate swap contracts ended in October 2014. As of September 30, 2014, the deferred accumulated gain applicable to the settled interest rate swap contracts included in accumulated other comprehensive income totaled $2.6 million ($1.7 million on an after-tax basis), all of which was recognized in interest income during 2014. As stated above, we enter into non-hedge related derivative positions primarily to accommodate the business needs of our customers. Upon the origination of a derivative contract with a customer, we simultaneously enter into an offsetting derivative contract with a third party financial institution. We recognize immediate income based upon the difference in the bid/ask spread of the underlying transactions with our customers and the third party. Because we act only as an intermediary for our customer, subsequent changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact our results of operations. Amounts included in the consolidated statements of income related to non-hedging interest rate, commodity and foreign currency derivative instruments are presented in the table below.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Non-hedging interest rate derivatives: |  |  |  |  |  |  |
Other non-interest income | $ | 293 |  |  | $ | 414 |  |  | $ | 1,855 |  |  | $ | 1,279 |
Other non-interest expense | (40 | ) |  | (5 | ) |  | (43 | ) |  | (3 | )
Non-hedging commodity derivatives: |  |  |  |  |  |  |
Other non-interest income | 1 |  |  | 7 |  |  | 67 |  |  | 100 |
Non-hedging foreign currency derivatives: |  |  |  |  |  |  |
Other non-interest income | (37 | ) |  | 43 |  |  | 74 |  |  | 118 |
Counterparty Credit Risk. Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Institutional counterparties must have an investment grade credit rating and be approved by our Asset/Liability Management Committee. Our credit exposure on interest rate swaps is limited to the net favorable value and interest payments of all swaps by each counterparty, while our credit exposure on commodity swaps/options and foreign currency forward contracts is limited to the net favorable value of all contracts by each counterparty. Credit exposure may be reduced by the amount of collateral pledged by the counterparty. There are no credit-risk-related contingent features associated with any of our derivative contracts. Certain derivative contracts with upstream financial institution counterparties may be terminated with respect to a party in the transaction, if such party does not have at least a minimum level rating assigned to either its senior unsecured long-term debt or its deposit obligations by certain third-party rating agencies. Our credit exposure relating to interest rate swaps, commodity swaps/options and foreign currency forward contracts with bank customers was approximately $47.2 million at September 30, 2015. This credit exposure is partly mitigated as transactions with customers are generally secured by the collateral, if any, securing the underlying transaction being hedged. Our credit exposure, net of collateral pledged, relating to interest rate swaps, commodity swaps/options and foreign currency forward contracts with upstream financial institution counterparties was approximately $7.4 million at September 30, 2015. This amount was primarily related to excess collateral we posted to counterparties. Collateral levels for upstream financial institution counterparties are monitored and adjusted as necessary. See Note 10 – Balance Sheet Offsetting for additional information regarding our credit exposure with upstream financial institution counterparties. The aggregate fair value of securities we posted as collateral related to derivative contracts totaled $22.6 million at September 30, 2015. At such date, we also had $21.5 million in cash collateral on deposit with other financial institution counterparties.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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