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DERIVATIVE INSTRUMENTS | 9 Months Ended
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Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company uses derivative instruments and other risk management techniques to reduce its exposure to adverse fluctuations in interest rates in accordance with its risk management policies. Interest Rate Swaps and Caps on Loans: The Company offers interest rate swap and cap products to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. When such products are issued, the Company also enters into an offsetting swap with institutional counterparties to eliminate the interest rate risk. These back-to-back derivative agreements, which generate fee income for the Company, are intended to offset each other. The Company retains the credit risk of the original loan. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer plus the fee. These swaps and caps are not designated as accounting hedges and are recorded at fair value in Other Assets and Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition. The changes in fair value are recorded in Other Income in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2018, changes in fair value recorded through Other Income in the Consolidated Statements of Operations were immaterial. For the three and nine months ended September 30, 2019, other income also includes a $603 thousand gain and $9.0 million loss on interest rate swaps related to the Freddie Mac multifamily securitization in which we sold the associated mortgage servicing rights. The $9.0 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution and was offset by the $8.9 million gross gain realized on the loans sold into the securitization in the third quarter of 2019. Interest Rate Swaps and Caps on Mortgage-backed Securities: During the third quarter, the Company partially hedged the fair value of the MBS portfolio using interest rate swaps. At the end of the quarter, the Company took advantage of the decline in long term interest rates and sold the majority of the MBS portfolio and unwound the majority of the interest rate swaps. The remaining balance of the MBS portfolio and the related interest rate swap is expected to be sold and unwound in the fourth quarter 2019. The unsold portion of the MBS portfolio has been deemed other–than–temporarily impaired and, along with the fair value adjustment on the swap, has been recorded as a loss in noninterest income with a net impact of $731 thousand and is included in the carrying value of MBS. Foreign Exchange Contracts: The Company offers short-term foreign exchange contracts to its customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with these products the Company also enters into offsetting contracts with institutional counterparties to hedge the Company’s foreign exchange rate risk. These back-to-back contracts allow the Company to offer its customers foreign exchange products while minimizing its exposure to foreign exchange rate fluctuations. These foreign exchange contracts are not designated as hedging instruments and are recorded at fair value in Other Assets and Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition. For the three and nine months ended September 30, 2019 and 2018, changes in fair value recorded through Other Income in the Consolidated Statements of Operations were immaterial. The following table presents the notional amount and fair value of derivative instruments included in the Consolidated Statements of Financial Condition as of the dates indicated.
|  | September 30, 2019 |  | December 31, 2018
($ in thousands) |  | Notional Amount |  | Fair Value(1) |  | Notional Amount |  | Fair Value(1)
Derivative assets: |  |  |  |  |  |  |  |
Interest rate swaps and caps on loans |  | $ | 101,253 |  |  | $ | 4,773 |  |  | $ | 103,812 |  |  | $ | 1,534 |
Foreign exchange contracts |  | 494 |  |  | 36 |  |  | — |  |  | — |
Total |  | $ | 101,747 |  |  | $ | 4,809 |  |  | $ | 103,812 |  |  | $ | 1,534 |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate swaps and caps on loans |  | $ | 101,253 |  |  | $ | 5,198 |  |  | $ | 103,812 |  |  | 1,600 |
Interest rate swaps on mortgage-backed securities |  | 14,469 |  |  | 325 |  |  | — |  |  | — |
Foreign exchange contracts |  | 494 |  |  | 30 |  |  | — |  |  | — |
Total |  | $ | 116,216 |  |  | $ | 5,553 |  |  | $ | 103,812 |  |  | $ | 1,600 |
(1) | The fair value of interest rate swaps and cap on loans are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated balance sheets. The fair value of interest rate swaps on mortgage-backed securities are include in the carrying value of mortgage-backed securities in the accompanying consolidated balance sheets.
The Company has entered into agreements with counterparty financial institutions, which include master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. However, the Company elected to account for all derivatives with counterparty institutions on a gross basis. Due to clearinghouse rule changes, variation margin payments are treated as settlements of derivative exposure rather than as collateral.

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- References No definition available. + Details
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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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