XML 30 R20.htm IDEA: XBRL DOCUMENT
v3.5.0.2

Derivative Financial Instruments | 9 Months Ended
--- | ---
Sep. 30, 2016
Derivative Financial Instruments | Note 12. Derivative Financial Instruments The Company’s derivative financial instruments consist of financial forward and futures contracts, interest rate swaps, IRLCs, and options. These derivatives relate to mortgage banking operations, residential MSRs, and other risk management activities, and seek to mitigate or reduce the Company’s exposure to losses from adverse changes in interest rates. These activities will vary in scope based on the level and volatility of interest rates, other changing market conditions, and the types of assets held. In accordance with the applicable accounting guidance, the Company takes into account the impact of collateral and master netting agreements that allow it to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related collateral when recognizing derivative assets and liabilities. As a result, the Company’s Statements of Financial Condition could reflect derivative contracts with negative fair values that are included in derivative assets, and contracts with positive fair values that are included in derivative liabilities. The Company held derivatives with a notional amount of $3.7 billion at September 30, 2016. Changes in the fair value of these derivatives are reflected in current-period earnings. None of these derivatives are designated as hedges for accounting purposes. The Company uses various financial instruments, including derivatives, in connection with its strategies to reduce pricing risk resulting from changes in interest rates. Derivative instruments may include IRLCs entered into with borrowers or correspondents/brokers to acquire agency-conforming fixed and adjustable rate residential mortgage loans that will be held for sale, as well as Treasury options and Eurodollar futures. The Company enters into forward contracts to sell fixed rate mortgage-backed securities to protect against changes in the prices of agency-conforming fixed rate loans held for sale. Forward contracts are entered into with securities dealers in an amount related to the portion of IRLCs that is expected to close. The value of these forward sales contracts moves inversely with the value of the loans in response to changes in interest rates. To manage the price risk associated with fixed-rate non-conforming mortgage loans, the Company generally enters into forward contracts on mortgage-backed securities or forward commitments to sell loans to approved investors. Short positions in Eurodollar futures contracts are used to manage price risk on adjustable rate mortgage loans held for sale. The Company uses interest rate swaps to hedge the fair value of its residential MSRs. The Company also purchases put and call options to manage the risk associated with variations in the amount of IRLCs that ultimately close. The following table sets forth information regarding the Company’s derivative financial instruments at September 30, 2016:
|  | September 30, 2016 |
|  | Notional |  |  | Unrealized (1) |
(in thousands) |  | Amount |  |  | Gain |  |  | Loss |
Treasury options |  | $ | 440,000 |  |  | $ | — |  |  | $ | 378 |
Eurodollar futures |  |  | 175,000 |  |  |  | 12 |  |  |  | 46 |
Swaps |  |  | 250,000 |  |  |  | 1,917 |  |  |  | — |
Forward commitments to sell loans/mortgage-backed securities |  |  | 1,255,010 |  |  |  | 56 |  |  |  | 5,175 |
Forward commitments to buy loans/mortgage-backed securities |  |  | 950,010 |  |  |  | 2,886 |  |  |  | — |
Interest rate lock commitments |  |  | 671,702 |  |  |  | 6,934 |  |  |  | — |
Total derivatives |  | $ | 3,741,722 |  |  | $ | 11,805 |  |  | $ | 5,599 |
(1) | Derivatives in a net gain position are recorded as “Other assets” and derivatives in a net loss position are recorded as “Other liabilities” in the Consolidated Statements of Condition.
In addition, the Company mitigates a portion of the risk associated with changes in the value of its residential MSRs. The general strategy for mitigating this risk is to purchase derivative instruments, the value of which changes in the opposite direction of interest rates. This action partially offsets changes in the value of its servicing assets, which tends to move in the same direction as interest rates. Accordingly, the Company purchases Eurodollar futures and call options on Treasury securities, and enters into forward contracts to purchase mortgage-backed securities. The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the periods indicated:
|  | (Loss) Gain Included in Mortgage Banking Income |
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Treasury options |  | $ | (6,245 | ) |  | $ | 2,485 |  |  | $ | 3,619 |  |  | $ | (2,589 | )
Treasury and Eurodollar futures |  |  | 17 |  |  |  | 1,134 |  |  |  | (38 | ) |  |  | 1,495 |
Swaps |  |  | (1,751 | ) |  |  | — |  |  |  | 2,427 |  |  |  | — |
Forward commitments to buy/sell loans/mortgage-backed securities |  |  | 1,768 |  |  |  | 294 |  |  |  | 48 |  |  |  | 4,084 |
Total (loss) gain |  | $ | (6,211 | ) |  | $ | 3,913 |  |  | $ | 6,056 |  |  | $ | 2,990 |
The Company has in place an enforceable master netting arrangement with every counterparty. All master netting arrangements include rights to offset associated with the Company’s recognized derivative assets, derivative liabilities, and the cash collateral received and pledged. Accordingly, the Company, where appropriate, offsets all derivative asset and liability positions with the cash collateral received and pledged. The following tables present the effect of the master netting arrangements on the presentation of the derivative assets in the Consolidated Statements of Condition as of the dates indicated:
|  | September 30, 2016 |
(in thousands) |  | Gross Amount of Recognized Assets (1) |  |  | Gross Amount Offset in the Statement of Condition |  |  | Net Amount of Assets Presented in the Statement of Condition |  |  | Gross Amounts Not Offset in the Consolidated Statement of Condition |  |  | Net Amount |
|  |  |  | Financial Instruments |  |  | Cash Collateral Received |  |
Derivatives |  | $ | 14,467 |  |  | $ | 2,864 |  |  | $ | 11,603 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,603 |
(1) | Includes $2.7 million to purchase Treasury options.
|  | December 31, 2015 |
(in thousands) |  | Gross Amount of Recognized Assets (1) |  |  | Gross Amount Offset in the Statement of Condition |  |  | Net Amount of Assets Presented in the Statement of Condition |  |  | Gross Amounts Not Offset in the Consolidated Statement of Condition |  |  | Net Amount |
|  |  |  | Financial Instruments |  |  | Cash Collateral Received |  |
Derivatives |  | $ | 5,743 |  |  | $ | 1,024 |  |  | $ | 4,719 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,719 |
(1) | Includes $1.9 million to purchase Treasury options.
The following tables present the effect the master netting arrangements had on the presentation of the derivative liabilities in the Consolidated Statements of Condition as of the dates indicated:
|  | September 30, 2016 |
(in thousands) |  | Gross Amount of Recognized Liabilities |  |  | Gross Amount Offset in the Statement of Condition |  |  | Net Amount of Liabilities Presented in the Statement of Condition |  |  | Gross Amounts Not Offset in the Consolidated Statement of Condition |  |  | Net Amount |
|  |  |  | Financial Instruments |  |  | Cash Collateral Pledged |  |
Derivatives |  | $ | 5,599 |  |  | $ | 5,386 |  |  | $ | 213 |  |  | $ | — |  |  | $ | — |  |  | $ | 213 |
|  | December 31, 2015 |
(in thousands) |  | Gross Amount of Recognized Liabilities |  |  | Gross Amount Offset in the Statement of Condition |  |  | Net Amount of Liabilities Presented in the Statement of Condition |  |  | Gross Amounts Not Offset in the Consolidated Statement of Condition |  |  | Net Amount |
|  |  |  | Financial Instruments |  |  | Cash Collateral Pledged |  |
Derivatives |  | $ | 4,322 |  |  | $ | 3,986 |  |  | $ | 336 |  |  | $ | — |  |  | $ | — |  |  | $ | 336 |

X
- 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
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration