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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments The Company uses derivative financial instruments to manage interest rate risk. Derivative instruments used as part of the Company's risk management strategy are further described in note 5 of the notes to consolidated financial statements included in the 2018 Annual Report. A tabular presentation of such derivatives outstanding as of September 30, 2019 and December 31, 2018 is presented below. Basis Swaps The following table summarizes the Company’s outstanding basis swaps in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").
|  | Notional amount |  |  |
|  | As of September 30, |  | As of December 31, |
Maturity |  | 2019 |  | 2018 |
2019 |  | $ | — |  |  | 3,500,000 |  |
2020 |  | 1,000,000 |  |  | 1,000,000 |  |
2021 |  | 250,000 |  |  | 250,000 |  |
2022 (a) |  | 2,000,000 |  |  | 2,000,000 |  |
2023 |  | 750,000 |  |  | 750,000 |  |
2024 |  | 1,750,000 |  |  | 250,000 |  |
2026 |  | 1,150,000 |  |  | 1,150,000 |  |
2027 (b) |  | 250,000 |  |  | 375,000 |  |
2028 (b) |  | — |  |  | 325,000 |  |
2029 (b) |  | — |  |  | 100,000 |  |
2031 (b) |  | — |  |  | 300,000 |  |
|  | $ | 7,150,000 |  |  | 10,000,000 |  |
(a) $750 million of the notional amount of these derivatives have forward effective start dates in May 2020. (b) During the third quarter of 2019, the Company terminated $125 million (notional amount), $325 million (notional amount), $100 million (notional amount), and $300 million (notional amount) of 1:3 Basis Swaps that had a maturity date in 2027, 2028, 2029, and 2031, respectively, and received $0.5 million in net proceeds. The weighted average rate paid by the Company on the 1:3 Basis Swaps as of September 30, 2019 and December 31, 2018 was one-month LIBOR plus 9.7 basis points and 9.4 basis points, respectively. Interest Rate Swaps – Floor Income Hedges The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.
|  | As of September 30, 2019 |  |  |  | As of December 31, 2018 |  |
Maturity |  | Notional amount |  | Weighted average fixed rate paid by the Company (a) |  | Notional amount |  | Weighted average fixed rate paid by the Company (a)
2019 |  | $ | 500,000 |  |  | 1.12 | % |  | $ | 3,250,000 |  |  | 0.97 | %
2020 |  | 1,500,000 |  |  | 1.01 |  |  | 1,500,000 |  |  | 1.01 |
2021 |  | 600,000 |  |  | 2.15 |  |  | 100,000 |  |  | 2.95 |
2022 (b) |  | 250,000 |  |  | 1.65 |  |  | — |  |  | — |
2023 |  | 150,000 |  |  | 2.25 |  |  | 400,000 |  |  | 2.24 |
2024 |  | — |  |  | — |  |  | 300,000 |  |  | 2.28 |
2027 |  | — |  |  | — |  |  | 25,000 |  |  | 2.35 |
|  | $ | 3,000,000 |  |  | 1.37 | % |  | $ | 5,575,000 |  |  | 1.18 | %
(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR. (b) These derivatives have forward effective start dates in June 2021. During the first and third quarters of 2019, the Company received $2.1 million and paid $16.5 million, respectively, to terminate $100.0 million (notional amount) and $700.0 million (notional amount), respectively, of floor income interest rate swaps prior to their final maturity. Interest Rate Swap Options – Floor Income Hedges During 2014 and 2018, the Company paid $9.1 million and $4.6 million, respectively, for interest rate swap options to economically hedge loans earning fixed rate floor income. The interest rate swap options gave the Company the right, but not the obligation, to enter into interest rate swaps during the third quarter of 2019 in which the Company would pay a weighted average fixed amount of 3.21 percent and receive discrete one-month or three-month LIBOR. The Company did not exercise its rights on these options, and such swap options expired. Interest Rate Caps In June 2015 and June 2019, the Company paid $2.9 million and $0.3 million, respectively, for interest rate cap contracts to mitigate a rise in interest rates and its impact on earnings related to its student loan portfolio earning a fixed rate. In the event that the one-month LIBOR or three-month LIBOR rate rises above the applicable strike rate, the Company would receive monthly payments related to the spread difference. The following table summarizes these derivative instruments as of September 30, 2019.
Notional Amount |  |  | Strike rate |  | Maturity date
$ | 125,000 |  |  | 2.50% (1-month LIBOR) |  | July 15, 2020
150,000 |  |  | 4.99 (1-month LIBOR) |  | July 15, 2020
500,000 |  |  | 2.25 (3-month LIBOR) |  | September 25, 2020
Consolidated Financial Statement Impact Related to Derivatives Balance Sheet The following table summarizes the fair value of the Company’s derivatives as reflected in the consolidated balance sheets. There is no difference between the gross amounts of recognized assets presented in the consolidated balance sheets related to the Company's derivative portfolio and the net amount when excluding derivatives subject to enforceable master netting arrangements and cash collateral received.
| Fair value of asset derivatives |  |  |  | Fair value of liability derivatives |  |
| As of September 30, 2019 |  | As of December 31, 2018 |  | As of September 30, 2019 |  | As of December 31, 2018
Interest rate swap options - floor income hedges | $ | — |  |  | 1,465 |  |  | — |  |  | — |
Interest rate caps | 57 |  |  | 353 |  |  | — |  |  | — |
Total | $ | 57 |  |  | 1,818 |  |  | — |  |  | — |
Income Statement Impact The following table summarizes the components of "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income.
| Three months ended September 30, |  |  |  | Nine months ended September 30, |  |
| 2019 |  | 2018 |  | 2019 |  | 2018
Settlements: |  |  |  |  |  |  |
1:3 basis swaps | $ | 234 |  |  | 3,361 |  |  | 3,375 |  |  | 4,676 |
Interest rate swaps - floor income hedges | 7,064 |  |  | 19,087 |  |  | 35,931 |  |  | 46,752 |
Interest rate swaps - hybrid debt hedges | — |  |  | (124) |  |  | — |  |  | (410) |
Total settlements - income | 7,298 |  |  | 22,324 |  |  | 39,306 |  |  | 51,018 |
Change in fair value: |  |  |  |  |  |  |
1:3 basis swaps | 6,636 |  |  | 1,283 |  |  | 4,427 |  |  | 12,058 |
Interest rate swaps - floor income hedges | (12,094) |  |  | (7,427) |  |  | (75,657) |  |  | 34,008 |
Interest rate swap options - floor income hedges | (1) |  |  | (31) |  |  | (1,465) |  |  | 437 |
Interest rate caps | (171) |  |  | 119 |  |  | (570) |  |  | 567 |
Interest rate swaps - hybrid debt hedges | — |  |  | 830 |  |  | — |  |  | 2,839 |
Total change in fair value - (expense) income | (5,630) |  |  | (5,226) |  |  | (73,265) |  |  | 49,909 |
Derivative market value adjustments and derivative settlements, net - income (expense) | $ | 1,668 |  |  | 17,098 |  |  | (33,959) |  |  | 100,927 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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