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Derivative Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In the ordinary course of business, the Company enters into derivative transactions as part of its overall interest rate risk management strategy. The significant accounting policies related to derivative instruments and hedging activities are presented in Note 1, "Summary of Significant Accounting Policies."
Cash Flow Hedges
As of December 31, 2020, the Company hedged $430.0 million of certain corporate variable rate loans using interest rate swaps through which the Company receives fixed amounts and pays variable amounts. The Company also hedged $25.0 million of borrowed funds using forward starting interest rate swaps through which the Company receives variable amounts and pays fixed amounts. These transactions allow the Company to add stability to net interest income and manage its exposure to interest rate movements.
The forward starting interest rate swaps total $25.0 million begin in January of 2023 and mature in January of 2026. The weighted-average fixed interest rate to be paid on these interest rate swaps that have not yet begun was 0.60% as of December 31, 2020. These derivative contracts are designated as cash flow hedges.
During 2020, the Company terminated longer term interest rate swaps with a notional amount of $1.6 billion, as well as reduced a portion of the borrowed funds related to terminated swaps as a result of excess liquidity and in response to current market conditions. As a result, a $31.9 million pre-tax loss was reclassified from AOCI and recorded in noninterest income.
Cash Flow Hedges
(Dollar amounts in thousands)
As of December 31,
 20202019
Gross notional amount outstanding$455,000 $1,905,000 
Derivative asset fair value in other assets(1)
3,707 727 
Derivative liability fair value in other liabilities(1)
(1)(119)
Weighted-average interest rate received2.18 %1.88 %
Weighted-average interest rate paid0.15 %1.74 %
Weighted-average maturity (in years)1.501.18
(1)Certain cash flow hedges are transacted through a clearinghouse ("centrally cleared") and their change in fair value is settled by the counterparties to the transaction, which results in no fair value.
Changes in the fair value of cash flow hedges are recorded in AOCI on an after-tax basis and are subsequently reclassified to interest income or expense in the period that the forecasted hedged item impacts earnings. As of December 31, 2020, the Company estimates that $8.7 million will be reclassified from AOCI as an increase to interest income over the next twelve months.
Other Derivative Instruments
The Company also enters into derivative transactions through capital market products with its commercial customers and simultaneously enters into an offsetting interest rate derivative transaction with third-parties. This transaction allows the Company's customers to effectively convert a variable rate loan into a fixed rate loan. Due to the offsetting nature of these transactions, the Company does not apply hedge accounting treatment. The Company's credit exposure on these derivative transactions results primarily from counterparty credit risk. The credit valuation adjustment ("CVA") is a fair value adjustment to the derivative to account for this risk. As of December 31, 2020 and 2019, the Company's credit exposure was fully secured by the underlying collateral on customer loans and mitigated through netting arrangements with third-parties; therefore, no CVA was recorded. Capital market products income related to commercial customer derivative instruments of $7.0 million, $13.9 million, and $7.7 million was recorded in noninterest income for the years ended December 31, 2020, 2019, and 2018, respectively.
Other Derivative Instruments
(Dollar amounts in thousands)
As of December 31,
 20202019
Gross notional amount outstanding$4,491,398 $4,340,384 
Derivative asset fair value in other assets(1)
149,997 61,709 
Derivative liability fair value in other liabilities(1)
(44,580)(18,416)
Fair value of derivative(2)
46,018 18,856 
(1)Certain other derivative instruments are centrally cleared and their change in fair value is settled by the counterparties to the transaction, which results in no fair value.
(2)This amount represents the fair value if credit risk related contingent factors were triggered.
The Company occasionally enters into risk participation agreements with counterparty banks to transfer or assume a portion of the credit risk related to customer transactions. The amounts of these instruments were not material for any period presented. The Company had no other derivative instruments as of December 31, 2020 and 2019. The Company does not enter into derivative transactions for purely speculative purposes.
The following table presents the impact of derivative instruments on comprehensive income and the reclassification of gains (losses) from AOCI to net income for the years ended December 31, 2020 and 2019, and 2018.
Cash Flow Hedge Accounting on AOCI
(Dollar amounts in thousands)
Years Ended December 31,
202020192018
Gains (losses) recognized in other comprehensive income
Interest rate swaps in interest income$28,197 $13,236 $18,776 
Interest rate swaps in interest expense(13,924)(16,873)(20,500)
Reclassification of gains (losses) included in net income
Interest rate swaps in interest income$7,409 $3,975 $2,611 
Interest rate swaps in interest expense(2,752)(5,008)(3,673)
Swap termination costs in noninterest income(31,852)— — 
The following table presents the impact of derivative instruments on net interest income for the years ended December 31, 2020, 2019, and 2018.
Hedge Income
(Dollar amounts in thousands)
 Years Ended December 31,
 202020192018
Cash Flow Hedges
Interest rate swaps in interest income$7,409 $3,975 $2,611 
Interest rate swaps in interest expense(2,752)(5,008)(3,673)
Total cash flow hedges 4,657 (1,033)(1,062)
Credit Risk
Derivative instruments are inherently subject to credit risk, which represents the Company's risk of loss when the counterparty to a derivative contract fails to perform according to the terms of the agreement. Credit risk is managed by limiting and collateralizing the aggregate amount of net unrealized losses by transaction, monitoring the size and the maturity structure of the derivatives, and applying uniform credit standards. Company policy establishes limits on credit exposure to any single counterparty. In addition, the Company established bilateral collateral agreements with derivative counterparties that provide for exchanges of marketable securities or cash to collateralize either party's net losses above a stated minimum threshold. As of December 31, 2020 and 2019, these collateral agreements covered 100% of the fair value of the Company's outstanding derivatives. Derivative assets and liabilities are presented gross, rather than net, of pledged collateral amounts.
Certain derivative instruments are subject to master netting agreements with counterparties. The Company records these transactions at their gross fair values and does not offset derivative assets and liabilities in the Consolidated Statements of Financial Condition. The following table presents the fair value of the Company's derivatives and offsetting positions as of December 31, 2020 and 2019.
Fair Value of Offsetting Derivatives
(Dollar amounts in thousands)
As of December 31,
20202019
 AssetsLiabilitiesAssetsLiabilities
Gross amounts recognized$153,704 $44,581 $62,436 $18,535 
Less: amounts offset in the Consolidated Statements of
  Financial Condition
— — — — 
Net amount presented in the Consolidated Statements of
  Financial Condition(1)
153,704 44,581 62,436 18,535 
Gross amounts not offset in the Consolidated Statements of
  Financial Condition:
Offsetting derivative positions(5,239)(5,239)(2,674)(2,674)
Cash collateral pledged— (39,970)— (15,861)
Net credit exposure$148,465 $(628)$59,762 $— 
(1)Included in other assets or other liabilities in the Consolidated Statements of Financial Condition.
As of December 31, 2020 and 2019, the Company's derivative instruments generally contained provisions that require the Company's debt to remain above a certain credit rating by each of the major credit rating agencies or that the Company maintain certain capital levels. If the Company's debt were to fall below that credit rating or the Company's capital were to fall below the required levels, it would be in violation of those provisions, and the counterparties to the derivative instruments could terminate the swap transaction and demand cash settlement of the derivative instrument in an amount equal to the derivative liability fair value. As of December 31, 2020 and 2019, the Company was in compliance with these provisions.