XML 61 R22.htm IDEA: XBRL DOCUMENT
v3.24.2.u1

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 6 Months Ended
--- | ---
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Risk Management Objectives of Using Derivatives Customers is exposed to certain risks arising from both its business operations and economic conditions. Customers manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources, and durations of its assets and liabilities. Specifically, Customers enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the values of which are determined by interest rates. Customers’ derivative financial instruments are used to manage differences in the amount, timing, and duration of Customers’ known or expected cash receipts and its known or expected cash payments principally related to certain borrowings and deposits. Customers also has interest-rate derivatives resulting from an accommodation provided to certain qualifying customers, and therefore, they are not used to manage Customers’ interest-rate risk in assets or liabilities. Customers manages a matched book with respect to its derivative instruments used in this customer service in order to minimize its net risk exposure resulting from such transactions. Fair Value Hedges of Benchmark Interest-Rate Risk Customers is exposed to changes in the fair value of certain of its fixed rate AFS debt securities, deposits and FHLB advances due to changes in the benchmark interest rate. Customers uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate such as the Fed Funds Effective Swap Rate. Interest rate swaps designated as fair value hedges of certain fixed rate AFS debt securities involve the payment of fixed-rate amounts to a counterparty in exchange for Customers receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate swaps designated as fair value hedges of certain deposits and FHLB advances involve the payment of variable-rate amounts to a counterparty in exchange for Customers receiving fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in net interest income. At June 30, 2024, Customers had 31 outstanding interest rate derivatives with notional amounts totaling $1.9 billion that were designated as fair value hedges of certain AFS debt securities, deposits and FHLB advances. During the three and six months ended June 30, 2024, Customers entered into 25 interest rate derivatives with notional amounts totaling $1.4 billion that were designated as fair value hedges of certain deposits and FHLB advances. During the six months ended June 30, 2023, Customers entered into five interest rate derivatives with notional amounts totaling $1.0 billion, two of which were terminated with notional amounts totaling $550.0 million that were designated as fair value hedges of certain deposits and FHLB advances resulting in $4.6 million of basis adjustments being amortized over the remaining terms of the hedged items as a reduction in interest expense. At December 31, 2023, Customers had six outstanding interest rate derivatives with notional amounts totaling $472.5 million that were designated as fair value hedges of certain AFS debt securities and FHLB advances. As of June 30, 2024 and December 31, 2023, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges.
|  | Amortized Cost |  | Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items
(amounts in thousands) |  | June 30, 2024 |  | December 31, 2023 |  | June 30, 2024 |  | December 31, 2023
AFS debt securities |  | $ | 22,500 |  |  | $ | 22,500 |  |  | $ | 508 |  |  | $ | 941 |
Deposits |  | 1,183,063 |  |  | 300,000 |  |  | (939) |  |  | 1,432 |
FHLB advances |  | 1,200,000 |  |  | 700,000 |  |  | (6,651) |  |  | 3,206 |
Derivatives Not Designated as Hedging Instruments Customers executes interest rate swaps (typically the loan customers will swap a floating-rate loan for a fixed-rate loan) and interest rate caps with commercial banking customers to facilitate their respective risk management strategies. The customer interest rate swaps and interest rate caps are simultaneously offset by interest rate swaps and interest rate caps that Customers executes with a third party in order to minimize interest-rate risk exposure resulting from such transactions. As the interest rate swaps and interest rate caps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and caps and the offsetting third-party market swaps and caps are recognized directly in earnings. At June 30, 2024, Customers had 126 interest rate swaps with an aggregate notional amount of $1.1 billion and two interest rate caps with an aggregated notional amount of $55.6 million related to this program. At December 31, 2023, Customers had 132 interest rate swaps with an aggregate notional amount of $1.2 billion and two interest rate caps with an aggregate notional amount of $55.6 million related to this program. Fair Value of Derivative Instruments on the Balance Sheet The following tables present the fair value of Customers’ derivative financial instruments as well as their presentation on the consolidated balance sheets as of June 30, 2024 and December 31, 2023.
|  | June 30, 2024
|  | Derivative Assets |  | Derivative Liabilities
(amounts in thousands) |  | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Interest rate swaps and caps (1) |  | Other assets |  | $ | 20,180 |  |  | Other liabilities |  | $ | 29,105 |
|  | December 31, 2023
|  | Derivative Assets |  | Derivative Liabilities
(amounts in thousands) |  | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Interest rate swaps and caps (1) |  | Other assets |  | $ | 17,903 |  |  | Other liabilities |  | $ | 27,097 |
(1) Customers’ centrally cleared derivatives are legally settled through variation margin payments and these payments are reflected as a reduction of the related derivative asset or liability, including accrued interest, on the consolidated balance sheet. Effect of Derivative Instruments on Net Income The following table presents amounts included in the consolidated statements of income related to derivatives designated as fair value hedges and derivatives not designated as hedges for the three and six months ended June 30, 2024 and 2023.
|  |  | Amount of Income (Loss) Recognized in Earnings
|  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
(amounts in thousands) | Income Statement Location |  | 2024 |  | 2023 |  | 2024 |  | 2023
Derivatives designated as fair value hedges: |  |  |  |  |  |  |  |
Recognized on interest rate swaps | Net interest income |  | $ | 3,563 |  |  | $ | 6,532 |  |  | $ | 11,736 |  |  | $ | 6,832 |
Recognized on hedged AFS debt securities | Net interest income |  | (256) |  |  | 50 |  |  | (433) |  |  | (250) |
Recognized on hedged deposits | Net interest income |  | (1,686) |  |  | — |  |  | (1,686) |  |  | — |
Recognized on hedged FHLB advances | Net interest income |  | (1,621) |  |  | (6,582) |  |  | (9,617) |  |  | (6,582) |
Total |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Interest rate swaps and caps | Other non-interest income |  | $ | 63 |  |  | $ | 165 |  |  | $ | 735 |  |  | $ | 140 |
Credit-risk-related Contingent Features By entering into derivative contracts, Customers is exposed to credit risk. The credit risk associated with derivatives executed with customers is the same as that involved in extending the related loans and is subject to the same standard credit policies. To mitigate the credit-risk exposure to major derivative dealer counterparties, Customers only enters into agreements with those counterparties that maintain credit ratings of high quality or with central clearing parties. Agreements with major derivative dealer counterparties contain provisions whereby default on any of Customers’ indebtedness would be considered a default on its derivative obligations. Customers also has entered into agreements that contain provisions under which the counterparty could require Customers to settle its obligations if Customers fails to maintain its status as a well/adequately capitalized institution. As of June 30, 2024, the fair value of derivatives in a net asset position related to these agreements was $19.4 million. In addition, Customers, which has collateral posting thresholds with certain of these counterparties, had received $22.7 million of cash as collateral at June 30, 2024. Customers records cash posted or received as collateral with these counterparties, except with a central clearing entity, as a reduction or an increase in the outstanding balance of cash and cash equivalents and an increase in the balance of other assets or other liabilities. Disclosures about Offsetting Assets and Liabilities The following tables present derivative instruments that are subject to enforceable master netting arrangements. Customers’ interest rate swaps and interest rate caps with institutional counterparties are subject to master netting arrangements and are included in the tables below. Interest rate swaps and interest rate caps with commercial banking customers are not subject to master netting arrangements and are excluded from the tables below. Customers has not made a policy election to offset its derivative positions.
| Gross Amounts Recognized on the Consolidated Balance Sheet |  |  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheet |  | Net Amount
(amounts in thousands) | Financial Instruments |  | Cash Collateral Received/Posted |
June 30, 2024 |  |  |  |  |  |  |  |  |  |  |
Interest rate derivative assets with institutional counterparties | $ | 19,876 |  |  |  |  |  |  | $ | (511) |  |  | $ | (19,365) |  |  | $ | — |
Interest rate derivative liabilities with institutional counterparties | $ | 511 |  |  |  |  |  |  | $ | (511) |  |  | $ | — |  |  | $ | — |
| Gross Amounts Recognized on the Consolidated Balance Sheet |  |  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheet |  | Net Amount
(amounts in thousands) | Financial Instruments |  | Cash Collateral Received/Posted |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |
Interest rate derivative assets with institutional counterparties | $ | 17,439 |  |  |  |  |  |  | $ | (500) |  |  | $ | (16,939) |  |  | $ | — |
Interest rate derivative liabilities with institutional counterparties | $ | 500 |  |  |  |  |  |  | $ | (500) |  |  | $ | — |  |  | $ | — |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration