XML 153 R15.htm IDEA: XBRL DOCUMENT v2.4.0.8
Derivatives and Hedging Activities
 6 Months Ended
Jun. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES AND HEDGING ACTIVITIES
NOTE 6–DERIVATIVES AND HEDGING ACTIVITIES:

In order to reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as certain mortgage loans held for sale or mortgage servicing rights, the Company utilizes derivatives, such as forward sale commitments, futures, option contracts, interest rate swaps and swaptions as risk management instruments in its hedging strategy. Derivative transactions are measured in terms of notional amount, which is not recorded in the consolidated statements of financial condition. The notional amount is generally not exchanged and is used as the basis for interest and other contractual payments. We held no derivatives designated as a cash flow or foreign currency hedge instruments at June 30, 2013 or December 31, 2012. Derivatives are reported at their respective fair values in the accounts receivable and other assets or accounts payable and other liabilities line items on the consolidated statements of financial condition, with changes in fair value reflected in current period earnings.

As permitted under U.S. GAAP, the Company nets derivative assets and liabilities when a legally enforceable master netting agreement exists between the Company and the derivative counterparty, which are documented under industry standard master agreements and credit support annexes. The Company's master netting agreements provide that following an uncured payment default or other event of default the non-defaulting party may promptly terminate all transactions between the parties and determine a net amount due to be paid to, or by, the defaulting party. An event of default may also occur under a credit support annex if a party fails to make a collateral delivery (which remains uncured following applicable notice and grace periods). The Company's right of offset requires that master netting agreements are legally enforceable and that the exercise of rights by the non-defaulting party under these agreements will not be stayed, or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding.

The collateral used under the Company's master netting agreements is typically cash, but securities may be used under agreements with certain counterparties. Receivables related to cash collateral that has been paid to counterparties is included in accounts receivable and other assets on the Company's consolidated statements of financial condition. Any securities pledged to counterparties as collateral remain on the consolidated statement of financial condition. Refer to Note 3, Investment Securities Available for Sale of this Form 10-Q for further information on securities collateral pledged. As of June 30, 2013 and December 31, 2012, the Company did not hold any collateral received from counterparties under derivative transactions.

For further information on the policies that govern derivative and hedging activities, see Note 1, Summary of Significant Accounting Policies and Note 11, Derivatives and Hedging Activities within the 2012 Annual Report on Form 10-K.

The notional amounts and fair values for derivatives consist of the following.
 
 
At June 30, 2013
 
Notional Amount
 
Fair Value Derivatives
(in thousands)
 
 
Asset
 
Liability
 
 
 
 
 
 
Forward sale commitments
$
1,362,188

 
$
42,984

 
$
(4,032
)
Interest rate swaptions
25,000

 
37

 
—

Interest rate lock commitments
812,540

 
6,765

 
(6,359
)
Interest rate swaps
394,440

 
931

 
(17,774
)
Total derivatives before netting
$
2,594,168

 
50,717

 
(28,165
)
Netting adjustments
 
 
(4,300
)
 
4,300

Carrying value on consolidated statements of financial condition
 
 
$
46,417

 
$
(23,865
)
 
 
At December 31, 2012
 
Notional Amount
 
Fair Value Derivatives
(in thousands)
 
 
Asset
 
Liability
 
 
 
 
 
 
Forward sale commitments
$
1,258,152

 
$
621

 
$
(2,743
)
Interest rate lock commitments
734,762

 
22,548

 
(20
)
Interest rate swaps
361,892

 
538

 
(9,358
)
Total derivatives before netting
$
2,354,806

 
23,707

 
(12,121
)
Netting adjustments
 
 
(1,052
)
 
1,052

Carrying value on consolidated statements of financial condition
 
 
$
22,655

 
$
(11,069
)

 
The following tables present gross and net information about derivative instruments.
 
At June 30, 2013
(in thousands)
Gross fair value
 
Netting adjustments
 
Carrying value
 
Cash collateral paid (1)
 
Securities pledged
 
Net amount
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
Forward sale commitments
$
42,984

 
$
(3,332
)
 
$
39,652

 
$
—

 
$
—

 
$
39,652

Interest rate swaps / swaptions
968

 
(968
)
 
—

 
—

 
—

 
—

Total derivatives subject to legally enforceable master netting agreements
43,952

 
(4,300
)
 
39,652

 
—

 
—

 
39,652

Interest rate lock commitments
6,765

 
—

 
6,765

 
—

 
—

 
6,765

Total derivative assets
$
50,717

 
$
(4,300
)
 
$
46,417

 
$
—

 
$
—

 
$
46,417

 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
Forward sale commitments
$
(4,032
)
 
$
3,332

 
$
(700
)
 
$
655

 
$
45

 
$
—

Interest rate swaps
(17,774
)
 
968

 
(16,806
)
 
15,554

 
711

 
(541
)
Total derivatives subject to legally enforceable master netting agreements
(21,806
)
 
4,300

 
(17,506
)
 
16,209

 
756

 
(541
)
Interest rate lock commitments
(6,359
)
 
—

 
(6,359
)
 
—

 
—

 
(6,359
)
Total derivative liabilities
$
(28,165
)
 
$
4,300

 
$
(23,865
)
 
$
16,209

 
$
756

 
$
(6,900
)

 
At December 31, 2012
(in thousands)
Gross fair value
 
Netting adjustments
 
Carrying value
 
Cash collateral paid (1)
 
Net amount
 
 
 
 
 
 
 
 
 
 
Derivative assets:
 
 
 
 
 
 
 
 
 
Forward sale commitments
$
621

 
$
(621
)
 
$
—

 
$
—

 
$
—

Interest rate swaps
538

 
(431
)
 
107

 
—

 
107

Total derivatives subject to legally enforceable master netting agreements
1,159

 
(1,052
)
 
107

 
—

 
107

Interest rate lock commitments
22,548

 
—

 
22,548

 
—

 
22,548

Total derivative assets
$
23,707

 
$
(1,052
)
 
$
22,655

 
$
—

 
$
22,655

 
 
 
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
 
 
Forward sale commitments
$
(2,743
)
 
$
621

 
$
(2,122
)
 
$
1,953

 
$
(169
)
Interest rate swaps
(9,358
)
 
431

 
(8,927
)
 
8,927

 
—

Total derivatives subject to legally enforceable master netting agreements
(12,101
)
 
1,052

 
(11,049
)
 
10,880

 
(169
)
Interest rate lock commitments
(20
)
 
—

 
(20
)
 
—

 
(20
)
Total derivative liabilities
$
(12,121
)
 
$
1,052

 
$
(11,069
)
 
$
10,880

 
$
(189
)

(1)
Excludes cash collateral of $11.6 million and $18.0 million at June 30, 2013 and December 31, 2012, which predominantly consists of collateral transferred by the Company at the initiation of derivative transactions and held by the counterparty as security. These amounts were not netted against the derivative payables, because, at an individual counterparty level, the collateral exceeded the fair value exposure at June 30, 2013 and December 31, 2012.

The ineffective portion of net gain (loss) on derivatives in fair value hedging relationships, recognized in other noninterest income on the consolidated statements of operations, for loans held for investment were $75 thousand and $(2) thousand for the three months ended June 30, 2013 and 2012, respectively and $106 thousand and $48 thousand for the six months ended June 30, 2013 and 2012, respectively.

The following table presents the net gain (loss) recognized on economic hedge derivatives within the respective line items in the statement of operations for the periods indicated.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
Recognized in noninterest income:
 
 
 
 
 
 
 
Net gain on mortgage loan origination and sale activities (1)
$
21,014

 
$
3,865

 
$
19,649

 
$
10,565

Mortgage servicing income (2)
(13,505
)
 
20,254

 
(16,023
)
 
19,739

 
$
7,509

 
$
24,119

 
$
3,626

 
$
30,304

 
(1)
Comprised of interest rate lock commitments ("IRLCs") and forward contracts used as an economic hedge of IRLCs and single family mortgage loans held for sale.
(2)
Comprised of interest rate swaps, interest rate swaptions and forward contracts used as an economic hedge of single family mortgage servicing rights ("MSRs").