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Derivatives | 9 Months Ended
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Sep. 30, 2017
Derivatives [Abstract] |
Derivatives | 6. Derivatives Risk Management Objective of Using Derivatives The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to select pools of variable rate loans and fixed rate brokered deposits. The Bank also enters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net risk exposure resulting from such agreements. The Bank also enters into risk participation agreements under which it may either sell or buy credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks. Fair Values of Derivative Instruments on the Balance Sheet The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2017 and December 31, 2016. Effective January 3, 2017, the Company’s central clearing counterparty amended its rulebook to legally characterize variation margin accounts as settlements, rather than being reflected separately as collateral. As a result of that change, the Company began prospectively reflecting derivative assets and liabilities net of the central clearing counterparty derivative margin account.
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﻿ |  |  |  |  | September 30, 2017 |  | December 31, 2016
﻿ |  |  |  |  |  |  | Derivative (1) |  |  |  | Derivative (1)
﻿(in thousands) |  | Type of Hedge |  |  | Notional or Contractual Amount |  | Assets |  | Liabilities |  | Notional or Contractual Amount |  | Assets |  | Liabilities
﻿Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Interest rate swaps |  | Cash Flow |  | $ | 875,000 |  | $ | — |  | $ | 7,924 |  | $ | 1,100,000 |  | $ | — |  | $ | 7,787
﻿Interest rate swaps |  | Fair Value |  |  | 363,000 |  |  | — |  |  | 823 |  |  | — |  |  | — |  |  | —
﻿ |  |  |  | $ | 1,238,000 |  | $ | — |  | $ | 8,747 |  | $ | 1,100,000 |  | $ | — |  | $ | 7,787
﻿Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Interest rate swaps (2) |  | N/A |  | $ | 1,172,752 |  | $ | 16,855 |  | $ | 17,420 |  | $ | 979,391 |  | $ | 18,405 |  | $ | 18,362
﻿Risk participation agreements |  | N/A |  |  | 109,556 |  |  | 34 |  |  | 108 |  |  | 84,732 |  |  | 50 |  |  | 105
﻿Forward commitments to sell residential mortgage loans |  | N/A |  |  | 93,809 |  |  | 91 |  |  | 669 |  |  | 75,676 |  |  | 900 |  |  | 221
﻿Interest rate-lock commitments on residential mortgage loans |  | N/A |  |  | 71,786 |  |  | 534 |  |  | 71 |  |  | 46,840 |  |  | 189 |  |  | 228
﻿Foreign exchange forward contracts |  | N/A |  |  | 55,081 |  |  | 2,465 |  |  | 2,423 |  |  | 56,152 |  |  | 771 |  |  | 729
﻿ |  |  |  |  | 1,502,984 |  |  | 19,979 |  |  | 20,691 |  |  | 1,242,791 |  |  | 20,315 |  |  | 19,645
﻿Total derivatives |  |  |  | $ | 2,740,984 |  | $ | 19,979 |  | $ | 29,438 |  | $ | 2,342,791 |  | $ | 20,315 |  | $ | 27,432
﻿Less: netting adjustment (3) |  |  |  |  |  |  |  | (2,780) |  |  | (16,747) |  |  |  |  |  | — |  |  | —
﻿Total derivative assets/liabilities |  |  |  |  |  |  | $ | 17,199 |  | $ | 12,691 |  |  |  |  | $ | 20,315 |  | $ | 27,432
| (1) |  | Derivative assets and liabilities are reported at fair value in other assets or other liabilities, respectively, in the consolidated balance sheets.
| (2) |  | The notional amount represents both the customer accommodation agreements and offsetting agreements with unrelated financial institutions.
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| (3) |  | Represents balance sheet netting of derivative assets and liabilities for variation margin collateral held or placed with the same central clearing counterparty. See offsetting assets and liabilities for further information.
﻿ ﻿ ﻿ Cash Flow Hedges of Interest Rate Risk The Company is party to various interest rate swap agreements designated and qualify ing as cash flow hedges of the Company’s forec asted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. The notional amounts of the swap agreements at September 30, 2017 expire as follows: $250 million in 2019; $200 million in 2020; and $425 million in 2022. During the terms of the swap agreements, the effective portion of changes in the fair value of the derivative instruments are recorded in Accumulated Other Comprehensive Income (“AOCI”) and subsequently reclassified into earnings in the periods that the hedged forecasted variabl e rate interest payments affect earnings. The impact on AOCI is reflected in Note 7- Shareholders’ Equity. There was virtually no ineffective portion of the change in fair value of the derivative s recognized directly in earnings during the three or nine months ended September 30, 2017 and 2016. ﻿ Fair Value Hedges of Interest Rate Risk ﻿ During 2017, the Company entered into interest rate swap agreements that modify the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps match the features of the hedged deposits. As interest rates fall, the decline in the value of the certificates of deposit is offset by the increase in the value of the interest rate swaps. Conversely, as interest rates rise, the value of the underlying hedged deposits increases, but the value of the interest rate swaps decrease s, resu lting in no impact on earnings. Interest expense is adjusted by the difference between the fixed and floating rates for the period the swaps are in effect. Hedge ineffectiveness on these transactions results in an increase or decrease in noninterest income. Derivatives Not Designated as Hedges Customer interest rate derivative program The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. Risk participation agreements The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan ag reement. The Bank manages its credit risk under risk participation agreements by monitoring the creditworthine ss of the borrower, based on the Bank’s normal credit review process. Mortgage banking derivatives The Bank also enters into certain deri vative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis. Customer foreign exchange forward contract derivatives The Bank enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial ban king customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. Effect of Derivative Instruments on the Income Statement ﻿ Derivative instrument income consisting primarily of customer interest rate swap fees, net of fair value adjustments, is reflected in the income statement in other noninterest income, totaling $1.3 million and $4.4 million for the three and nine months ended September 30, 2017, respectively, and $1.3 million and $1.7 million for the three and nine months ended September 30, 2016, respectively. The impact to interest income from cash flow hedges was ($0.1) million and ($0.2) million for the three and nine months ended September 30, 2017, respectively and $0.7 million and $1.7 million for the three and nine months ended September 30, 2016, respectively. For the three and nine months ended September 30, 2017, the fair value hedges entered into during the period reduced interest expense on deposits by $0.2 million and $0.6 million, respectively, and had minimal impact on noninterest income due to ineffectiveness. Credit Risk-R elated Contingent Features Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in ce rtain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. As of September 30, 2017, the aggregate fair value of derivative instruments with credit risk-related contingent features that were in a net liability position was $16.6 million. Offsetting Assets and Liabilities The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. As noted above, effective January 3, 2017, the Company began to reflect its derivative assets and liabilities net of the central clearing party variation margin account in the Statement of Income. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at September 30, 2017 and Decemb er 31, 2016 is presented in the following tables. ﻿ ﻿
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﻿(in thousands) |  |  |  |  | Gross Amounts |  | Net Amounts |  | Gross Amounts Not Offset in the Statement of Income
﻿Description |  | Gross Amounts Recognized |  | Offset in the Statement of Income |  | Presented in the Statement of Income |  | Financial Instruments |  | Cash Collateral |  | Net Amount
﻿As of September 30, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Derivative Assets |  | $ | 5,271 |  | $ | (3,942) |  | $ | 1,329 |  | $ | 1,329 |  | $ | — |  | $ | —
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﻿Derivative Liabilities |  | $ | 21,889 |  | $ | (16,322) |  | $ | 5,567 |  | $ | 1,329 |  | $ | 7,318 |  | $ | (3,080)
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﻿(in thousands) |  |  |  |  | Gross Amounts |  | Net Amounts |  | Gross Amounts Not Offset in the Statement of Income
﻿Description |  | Gross Amounts Recognized |  | Offset in the Statement of Income |  | Presented in the Statement of Income |  | Financial Instruments |  | Cash Collateral |  | Net Amount
﻿As of December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Derivative Assets |  | $ | 4,788 |  | $ | — |  | $ | 4,788 |  | $ | 4,788 |  | $ | — |  | $ | —
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﻿Derivative Liabilities |  | $ | 26,846 |  | $ | — |  | $ | 26,846 |  | $ | 4,788 |  | $ | 19,095 |  | $ | 2,963
﻿ The Company has excess collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.

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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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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=64837297&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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