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BALANCE SHEET OFFSETTING (Notes) | 3 Months Ended
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Mar. 31, 2020
Offsetting [Abstract] |
Balance Sheet Offsetting | DERIVATIVES AND HEDGING The Company uses derivative financial instruments for risk management purposes (primarily interest rate risk) and not for trading or speculative purposes. The Company controls the credit risk associated with these derivative financial instruments through collateral, credit approvals and monitoring procedures. Derivative financial instruments are carried at fair value on the consolidated statements of condition. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it has been designated as a hedge for accounting purposes, and, if so, the type of hedge it has been designated as. The changes in fair value of the Company's derivative instruments not designated as hedges are accounted for within the consolidated statements of income. Quarterly, in conjunction with financial reporting, each cash flow hedge is assessed for ineffectiveness. To the extent ineffectiveness is identified, this amount is recorded within the consolidated statements of income. The gain or loss on the effective portion of the cash flow hedge is reclassified from AOCI into interest within the consolidated statements of income in the period the hedged transaction affects earnings. Derivatives Not Designated as Hedges Customer Loan Swaps The Company will enter into interest rate swaps with its commercial customers to provide them with a means to lock into a long-term fixed rate, while simultaneously entering into an arrangement with a counterparty to swap the fixed rate to a variable rate to manage its interest rate exposure effectively. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not materially change the Company's interest rate risk or present any material exposure to its consolidated statements of income. Customer loan swaps are presented on a gross basis within other assets and accrued interest and other liabilities on the consolidated statements of condition. The following table presents the total positions, notional and fair value of the Company's customer loans swaps with each party for the dates indicated:
(In thousands, except number of positions) |  |  |  | March 31, 2020 |  | December 31, 2019
| Presentation on Consolidated Statements of Condition |  | Number of Positions |  | Notional Amount |  | Fair Value |  | Number of Positions |  | Notional Amount |  | Fair Value
Receive fixed, pay variable |  | Accrued interest and other liabilities |  | — |  |  | $ | — |  |  | $ | — |  |  | 10 |  |  | $ | 45,243 |  |  | $ | (514 | )
Receive fixed, pay variable |  | Other assets |  | 85 |  |  | 408,545 |  |  | 45,220 |  |  | 75 |  |  | 366,351 |  |  | 17,756 |
Pay fixed, receive variable |  | (Accrued interest and other liabilities) / other assets |  | 85 |  |  | 408,545 |  |  | (45,220 | ) |  | 85 |  |  | 411,594 |  |  | (17,242 | )
Total |  |  |  | 170 |  |  | $ | 817,090 |  |  | $ | — |  |  | 170 |  |  | $ | 823,188 |  |  | $ | — |
The Company seeks to mitigate its customer counterparty credit risk exposure through its loan policy and underwriting process, which includes credit approval limits, monitoring procedures, and obtaining collateral, where appropriate. The Company mitigates its institutional counterparty credit risk exposure by limiting the institutions for which it will enter into interest swap arrangements through an approved listing by its Board of Directors. The Company has entered into a master netting arrangement with its counterparty and settles payments with the counterparty as necessary. The Company's arrangement with its institutional counterparty requires it to post cash or other assets as collateral for its customer loan swap contracts in a net liability position based on their aggregate fair value and the Company's credit rating. The Company may also receive cash collateral for contracts in a net asset position as requested. At March 31, 2020 and December 31, 2019 the Company posted $46.2 million and $18.4 million, respectively, of cash to the counterparty as collateral on its customer loan swap contracts which was presented within other assets on the consolidated statements of condition. Refer to Note 9 for further discussion of master netting arrangements and presentation within the Company's consolidated financial statements. Fixed-Rate Mortgage Interest Rate Lock Commitments As part of the origination process of a residential loan, the Company may enter into rate lock agreements with its borrower, which is considered an interest rate lock commitment. If the Company intends to sell the loan upon origination, it will account for the interest rate lock commitment as a derivative. The Company's pipeline of mortgage loans with fixed-rate interest rate lock commitments for which it intends to sell the loan upon origination was as follows for the dates indicated:
|  |  |  | March 31, 2020 |  | December 31, 2019
(In thousands) |  | Presentation on Consolidated Statements of Condition |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Fixed-rate mortgage interest rate locks |  | Other assets |  | $ | 91,943 |  |  | $ | 2,241 |  |  | $ | 27,087 |  |  | $ | 480 |
Fixed-rate mortgage interest rate locks |  | Accrued interest and other liabilities |  | 36,538 |  |  | (264 | ) |  | 2,519 |  |  | (18 | )
Total |  |  |  | $ | 128,481 |  |  | $ | 1,977 |  |  | $ | 29,606 |  |  | $ | 462 |
For the three months ended March 31, 2020 and 2019, the net unrealized gain from the change in fair value on the Company's fixed-rate mortgage rate locks reported within mortgage banking income, net, on the consolidated statements of income was $1.5 million and $181,000, respectively. Forward Delivery Commitments The Company typically enters into a forward delivery commitment with a secondary market investor, which has been approved by the Company within its normal governance process, at the onset of the loan origination process. The Company may enter into these arrangements with the secondary market investors on a "best effort" or "mandatory delivery" basis. The Company's normal practice is typically to enter into these arrangements on a "best effort" basis. The Company enters into these arrangements with the secondary market investors to manage its interest rate exposure. The Company accounts for the forward delivery commitment as a derivative upon origination of a loan identified as held for sale. The Company's forward delivery commitments on loans held for sale for the dates indicated were as follows:
|  |  |  | March 31, 2020 |  | December 31, 2019
(In thousands) |  | Presentation on Consolidated Statements of Condition |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Forward delivery commitments ("best effort") |  | Other Assets |  | $ | 26,786 |  |  | $ | 1,185 |  |  | $ | 10,846 |  |  | $ | 312 |
Forward delivery commitments ("best effort") |  | Accrued interest and other liabilities |  | 1,570 |  |  | (30 | ) |  | 1,069 |  |  | (15 | )
Total |  |  |  | $ | 28,356 |  |  | $ | 1,155 |  |  | $ | 11,915 |  |  | $ | 297 |
For the three months ended March 31, 2020 and 2019, the net unrealized gain from the change in fair value on the Company's forward delivery commitments reported within mortgage banking income, net, on the consolidated statements of income was $858,000 and $83,000, respectively. Derivatives Designated as Hedges Interest Rate Swap on Loans In 2019, the Company entered into a $100.0 million interest rate swap contract with a counterparty to manage interest rate risk associated with its variable-rate loans. The Company has entered into a master netting arrangement with its institutional counterparty and settles payments monthly on a net basis. The arrangement with the institutional counterparty requires it to post collateral for its interest rate swaps on loans and borrowings when they are in a net liability position based on their fair values. If the interest rate swaps are in a net asset position based on their fair values, the counterparty will post collateral to the Company as requested. At March 31, 2020, the institutional counterparty posted $3.8 million of cash as collateral on its interest rate swaps on loans and borrowings, which was presented within interest-bearing deposits in other banks as restricted cash with a matching liability within accrued interest and other liabilities on the consolidated statements of condition. At December 31, 2019, the counterparty posted $560,000 as collateral on its interest rate swap on loans. Refer to Note 9 for further discussion of master netting arrangements and presentation within the Company's consolidated financial statements. The details of the interest rate swap for the dates indicated were as follows:
(Dollars in thousands) |  |  |  |  |  |  |  | March 31, 2020 |  | December 31, 2019
Trade Date |  | Maturity Date |  | Variable Index Paid |  | Fixed Rate Received |  | Presentation on Consolidated Statements of Condition |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
6/12/2019 |  | 6/10/2024 |  | 1-Month USD LIBOR |  | 1.693% |  | Other assets |  | $ | 100,000 |  |  | $ | 5,591 |  |  | $ | 100,000 |  |  | $ | 483 |
For the three months ended March 31, 2020, the Company did not record any ineffectiveness within the consolidated statements of income. Net payments received from the institutional counterparty for the three months ended March 31, 2020 were $52,000, and were classified as cash flows from operating activities within the consolidated statements of cash flows. Interest Rate Swaps on Borrowings In March 2020, the Company entered into two $50.0 million interest rate swap arrangements with an institutional counterparty to mitigate interest rate risk. The Company has entered into a master netting arrangement with the institutional counterparty and settles payments on a net basis, monthly for the Federal Funds Effective Rate swap and quarterly for the 3-Month USD LIBOR swap. The arrangement with the institutional counterparty requires it to post collateral for its interest rate swaps on loans and borrowings when they are in a net liability position based on their fair values. If the interest rate swaps are in a net asset position based on their fair values, the counterparty will post collateral to the Company as requested. Collateral posted to the institutional counterparty or received is settled net with the interest rate swap on loans discussed above. The details of the Company's interest rate swaps on borrowings for the dates indicated were as follows:
(Dollars in thousands) |  |  |  |  |  |  |  | March 31, 2020
Trade Date |  | Maturity Date |  | Variable Index Received |  | Fixed Rate Paid |  | Presentation on Consolidated Statements of Condition |  | Notional Amount |  | Fair Value
3/2/2020 |  | 3/1/2023 |  | Fed Funds Effective Rate |  | 0.705% |  | Accrued interest and other liabilities |  | $ | 50,000 |  |  | $ | (853 | )
3/26/2020 |  | 3/26/2030 |  | 3-Month USD LIBOR |  | 0.857% |  | Accrued interest and other liabilities |  | 50,000 |  |  | (762 | )
|  |  |  |  |  |  |  |  |  | $ | 100,000 |  |  | $ | (1,615 | )
For the three months ended March 31, 2020, the Company did not record any ineffectiveness within the consolidated statements of income. Junior Subordinated Debt Interest Rate Swaps The Company entered into five interest rate swap agreements with an institutional counterparty to manage interest rate risk associated with the Company's variable rate borrowings. The Company entered into a master netting arrangement with its institutional counterparty and settles payments quarterly on a net basis. The interest rate swap arrangements contain provisions that require the Company to post cash or other assets as collateral with the counterparty for contracts that are in a net liability position based on their aggregate fair value and the Company’s credit rating. If the interest rate swaps are in a net asset position based on their aggregate fair value, the institutional counterparty will post collateral to the Company as requested. At March 31, 2020 and December 31, 2019, the Company posted $13.3 million and $8.8 million, respectively, of cash as collateral to the institutional counterparty, which was presented within other assets on the consolidated statements of financial condition. Refer to Note 9 for further discussion of master netting arrangements and presentation within the Company's consolidated financial statements. The details of the junior subordinated debt interest rate swaps for the dates indicated were as follows:
(Dollars in thousands) |  |  |  |  |  |  |  | March 31, 2020 |  | December 31, 2019
Trade Date |  | Maturity Date |  | Variable Index Received |  | Fixed Rate Paid |  | Presentation on Consolidated Statements of Condition |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
3/18/2009 |  | 6/30/2021 |  | 3-Month USD LIBOR |  | 5.09% |  | Accrued interest and other liabilities |  | $ | 10,000 |  |  | $ | (396 | ) |  | $ | 10,000 |  |  | $ | (299 | )
7/8/2009 |  | 6/30/2029 |  | 3-Month USD LIBOR |  | 5.84% |  | Accrued interest and other liabilities |  | 10,000 |  |  | (3,494 | ) |  | 10,000 |  |  | (2,318 | )
5/6/2010 |  | 6/30/2030 |  | 3-Month USD LIBOR |  | 5.71% |  | Accrued interest and other liabilities |  | 10,000 |  |  | (3,686 | ) |  | 10,000 |  |  | (2,384 | )
3/14/2011 |  | 3/30/2031 |  | 3-Month USD LIBOR |  | 4.35% |  | Accrued interest and other liabilities |  | 5,000 |  |  | (1,993 | ) |  | 5,000 |  |  | (1,279 | )
5/4/2011 |  | 7/7/2031 |  | 3-Month USD LIBOR |  | 4.14% |  | Accrued interest and other liabilities |  | 8,000 |  |  | (3,073 | ) |  | 8,000 |  |  | (1,907 | )
|  |  |  |  |  |  |  |  |  | $ | 43,000 |  |  | $ | (12,642 | ) |  | $ | 43,000 |  |  | $ | (8,187 | )
For the three months ended March 31, 2020 and 2019, the Company did no t record any ineffectiveness on these cash flow hedges within the consolidated statements of income. Net payments to the counterparty for the three months ended March 31, 2020 and 2019 were $240,000 and $152,000, respectively, and were classified as cash flows from operating activities in the Company's consolidated statements of cash flows. The table below presents the effect of the Company’s derivative financial instruments included in OCI and current earnings for the periods indicated:
|  | For The Three Months Ended March 31,
(In thousands) |  | 2020 |  | 2019
Derivatives designated as cash flow hedges: |  |  |  |
Effective portion of unrealized losses recognized within OCI during the period, net of tax |  | $ | (902 | ) |  | $ | (925 | )
Net reclassification adjustment for effective portion of cash flow hedges included in interest expense, gross |  | $ | 240 |  |  | $ | 119 |
Net reclassification adjustment for effective portion of cash flow hedges included in interest income, gross |  | $ | (52 | ) |  | $ | — |
The Company expects approximately $577,000 to be reclassified from AOCI, related to the Company’s cash flow hedges, in the next 12 months, decreasing net interest income on the consolidated statements of income. This reclassification is due to anticipated payments that will be made on the swaps based upon the forward curve as of March 31, 2020. BALANCE SHEET OFFSETTING The Company does not offset the carrying value for derivative instruments or repurchase agreements on the consolidated statements of condition. The Company does net the amount recognized for the right to reclaim cash collateral against the obligation to return cash collateral arising from instruments executed with the same counterparty under a master netting arrangement. Collateral legally required to be pledged or received is monitored and adjusted as necessary. Refer to Note 6 for further discussion of repurchase agreements and Note 8 for further discussion of derivative instruments. The following table presents the Company's derivative positions and repurchase agreements, and the potential effect of netting arrangements on its financial position, as of the dates indicated:
|  |  |  |  |  |  |  | Gross Amount Not Offset in the Consolidated Statements of Condition |  |
(In thousands) |  | Gross Amount Recognized in the Consolidated Statements of Condition |  | Gross Amount Offset in the Consolidated Statements of Condition |  | Net Amount Presented in the Consolidated Statements of Condition |  | Financial Instruments Pledged (Received)(1) |  | Cash Collateral Pledged (Received)(1) |  | Net Amount
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer loan swaps - commercial customer(2) |  | $ | 45,220 |  |  | $ | — |  |  | $ | 45,220 |  |  | $ | — |  |  | $ | — |  |  | $ | 45,220 |
Interest rate swap on loans(3) |  | 5,591 |  |  | — |  |  | 5,591 |  |  | — |  |  | (5,435 | ) |  | 156 |
Total |  | $ | 50,811 |  |  | $ | — |  |  | $ | 50,811 |  |  | $ | — |  |  | $ | (5,435 | ) |  | $ | 45,376 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Customer loan swaps - dealer bank |  | $ | 45,220 |  |  | $ | — |  |  | $ | 45,220 |  |  | $ | — |  |  | $ | 45,220 |  |  | — |
Junior subordinated debt interest rate swaps |  | 12,642 |  |  | — |  |  | 12,642 |  |  | — |  |  | 12,642 |  |  | — |
Interest rate swaps on borrowings(3) |  | 1,615 |  |  | — |  |  | 1,615 |  |  | — |  |  | 1,615 |  |  | — |
Total |  | $ | 59,477 |  |  | $ | — |  |  | $ | 59,477 |  |  | $ | — |  |  | $ | 59,477 |  |  | $ | — |
Customer repurchase agreements |  | $ | 265,997 |  |  | $ | — |  |  | $ | 265,997 |  |  | $ | 265,997 |  |  | $ | — |  |  | $ | — |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer loan swaps - commercial customer(2) |  | 17,756 |  |  | — |  |  | 17,756 |  |  | — |  |  | — |  |  | 17,756 |
Interest rate swap on loans |  | 483 |  |  | — |  |  | 483 |  |  | — |  |  | (483 | ) |  | — |
Total |  | $ | 18,239 |  |  | $ | — |  |  | $ | 18,239 |  |  | $ | — |  |  | $ | (483 | ) |  | $ | 17,756 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Customer loan swaps - dealer bank |  | $ | 17,242 |  |  | $ | — |  |  | $ | 17,242 |  |  | $ | — |  |  | $ | 17,242 |  |  | $ | — |
Junior subordinated debt interest rate swaps |  | $ | 8,187 |  |  | $ | — |  |  | $ | 8,187 |  |  | $ | — |  |  | $ | 8,187 |  |  | $ | — |
Customer loan swaps - commercial customer(2) |  | 514 |  |  | — |  |  | 514 |  |  | — |  |  | — |  |  | 514 |
Total |  | $ | 25,943 |  |  | $ | — |  |  | $ | 25,943 |  |  | $ | — |  |  | $ | 25,429 |  |  | $ | 514 |
Customer repurchase agreements |  | $ | 237,984 |  |  | $ | — |  |  | $ | 237,984 |  |  | $ | 237,984 |  |  | $ | — |  |  | $ | — |
(1) | The amount presented was the lesser of the amount pledged (received) or the net amount presented in the consolidated statements of condition.
(2) The Company manages its net exposure on its commercial customer loan swaps by obtaining collateral as part of the normal loan policy and underwriting practices.
(3) | Interest rate swap contracts were completed with same dealer bank. The Company maintains a master netting arrangement and settles collateral requested or pledged on a net basis for all contracts.

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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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- References No definition available. + Details
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