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Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS

The following table presents the notional amounts and fair values of derivative financial instruments as of December 31:
 
2017
 
2016
 
Notional
Amount
 
Asset
(Liability)
Fair Value
 
Notional
Amount
 
Asset
(Liability)
Fair Value
 
(in thousands)
Interest Rate Locks with Customers
 
 
 
 
 
 
 
Positive fair values
$
129,469

 
$
1,059

 
$
87,119

 
$
863

Negative fair values
8,957

 
(59
)
 
18,239

 
(227
)
Net interest rate locks with customers
 
 
1,000

 
 
 
636

Forward Commitments
 
 
 
 
 
 
 
Positive fair values
3,856

 
34

 
70,031

 
2,223

Negative fair values
100,808

 
(213
)
 
19,964

 
(112
)
Net forward commitments
 
 
(179
)
 
 
 
2,111

Interest Rate Swaps with Customers
 
 
 
 
 
 
 
Positive fair values
1,316,548

 
24,505

 
876,744

 
24,397

Negative fair values
716,634

 
(18,978
)
 
583,060

 
(16,998
)
Net interest rate swaps with customers
 
 
5,527

 
 
 
7,399

Interest Rate Swaps with Dealer Counterparties
 
 
 
 
 
 
 
Positive fair values(1) (3)
716,634

 
18,941

 
583,060

 
16,998

Negative fair values(2) (3)
1,316,548

 
(19,764
)
 
876,744

 
(24,397
)
Net interest rate swaps with dealer counterparties
 
 
(823
)
 
 
 
(7,399
)
Foreign Exchange Contracts with Customers
 
 
 
 
 
 
 
Positive fair values
4,852

 
276

 
11,674

 
504

Negative fair values
5,914

 
(119
)
 
4,659

 
(221
)
Net foreign exchange contracts with customers
 
 
157

 
 
 
283

Foreign Exchange Contracts with Correspondent Banks
 
 
 
 
 
 
 
Positive fair values
7,960

 
184

 
7,040

 
241

Negative fair values
6,048

 
(255
)
 
12,869

 
(447
)
Net foreign exchange contracts with correspondent banks
 
 
(71
)
 
 
 
(206
)
Net derivative fair value asset
 
 
$
5,611

 
 
 
$
2,824



(1) Includes centrally cleared interest rate swaps with a notional amount of $24.4 million and a fair value of $0 as of December 31, 2017.
(2) Includes centrally cleared interest rate swaps with a notional amount of $377.1 million and a fair value of $0 as of December 31, 2017.
(3) The variation margin posted as collateral on centrally cleared interest rate swaps, which represents the fair value of such swaps, is legally characterized as settlements of the outstanding derivative contracts instead of cash collateral. Accordingly, the fair values of centrally cleared interest rate swaps were offset by variation margins totaling $4.6 million as of December 31, 2017, reducing the fair value of such swaps to $0. There were no centrally cleared interest rate swaps as of December 31, 2016.

The following table presents the fair value gains and losses on derivative financial instruments for the years ended December 31:
 
2017
 
2016
 
2015
 
Statement of Income Classification
 
(in thousands)
 
 
Interest rate locks with customers
$
364

 
$
(639
)
 
$
(110
)
 
Mortgage banking income
Forward commitments
(2,290
)
 
1,930

 
1,345

 
Mortgage banking income
Interest rate swaps with customers (1)
(1,872
)
 
(25,461
)
 
13,342

 
Other non-interest expense
Interest rate swaps with counterparties (1)
6,576

 
25,461

 
(13,342
)
 
Other non-interest expense
Foreign exchange contracts with customers
(126
)
 
353

 
(439
)
 
Other service charges and fees
Foreign exchange contracts with correspondent banks
135

 
(487
)
 
711

 
Other service charges and fees
Net fair value gains on derivative financial instruments
$
2,787

 
$
1,157

 
$
1,507

 
 

(1) Not included is the $4.6 million expense related to the variation margin settlement.
The Corporation has elected to record mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of and for the years ended December 31, 2017 and 2016:
 
Cost (1)
 
Fair Value
 
Balance Sheet
Classification
 
Fair Value Gain (Loss)
 
Statement of Income Classification
 
(in thousands)
December 31, 2017:
 
 
 
 
 
 
 
 
 
Mortgage loans held for sale
$
31,069

 
$
31,530

 
Loans held for sale
 
$
472

 
Mortgage banking income
December 31, 2016:
 
 
 
 
 
 
 
 
 
Mortgage loans held for sale
28,708

 
28,697

 
Loans held for sale
 
(313
)
 
Mortgage banking income

(1)
Cost basis of mortgage loans held for sale represents the unpaid principal balance.

The fair values of interest rate swap agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets as they are subject to master netting arrangements or similar agreements. The Corporation elects to not offset assets and liabilities subject to such arrangements on the consolidated financial statements. The following table presents the financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets as of December 31:
 
Gross Amounts
 
Gross Amounts Not Offset
 
 
 
Recognized
 
 on the Consolidated
 
 
 
on the
 
Balance Sheets
 
 
 
Consolidated
 
Financial
 
Cash
 
Net
 
Balance Sheets
 
Instruments (1)
 
Collateral (2)
 
Amount
 
(in thousands)
2017
 
 
 
 
 
 
 
Interest rate swap derivative assets
$
43,446

 
$
(16,844
)
 
$
—

 
$
26,602

Foreign exchange derivative assets with correspondent banks
184

 
(184
)
 
—

 
—

   Total
$
43,630

 
$
(17,028
)
 
$
—

 
$
26,602

 
 
 
 
 
 
 
 
Interest rate swap derivative liabilities
$
38,742

 
$
(16,844
)
 
$
(6,588
)
 
$
15,310

Foreign exchange derivative liabilities with correspondent banks
255

 
(184
)
 
—

 
71

   Total
$
38,997

 
$
(17,028
)
 
$
(6,588
)
 
$
15,381

 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
Interest rate swap derivative assets
$
41,395

 
$
(15,117
)
 
$
—

 
$
26,278

Foreign exchange derivative assets with correspondent banks
241

 
(241
)
 
—

 
—

   Total
$
41,636

 
$
(15,358
)
 
$
—

 
$
26,278

 
 
 
 
 
 
 
 
Interest rate swap derivative liabilities
$
41,395

 
$
(15,117
)
 
$
(4,010
)
 
$
22,268

Foreign exchange derivative liabilities with correspondent banks
447

 
(241
)
 
(206
)
 
—

   Total
$
41,842

 
$
(15,358
)
 
$
(4,216
)
 
$
22,268


(1)
For interest rate swap assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default. For interest rate swap liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.
(2)
Amounts represent cash collateral (posted by the Corporation) or received from the counterparty on interest rate swap transactions and foreign exchange contracts with financial institution counterparties. Interest rate swaps with customers are collateralized by the same collateral securing the underlying loans to those borrowers. Cash and securities collateral amounts are included in the table only to the extent of the net derivative fair values.