| 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. |
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