Derivative Instruments and Other Hedging Activities

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Other Hedging Activities

DERIVATIVE INSTRUMENTS AND OTHER HEDGING ACTIVITIES

The Company enters into derivative financial instruments to manage interest rate risk and other exposures such as liquidity and credit risk, as well as to facilitate customer transactions. The primary types of derivatives used by the Company include interest rate swap agreements, foreign exchange contracts, interest rate lock commitments, forward sales commitments, and written and purchased options. All derivative instruments are recognized on the consolidated balance sheets as other assets or other liabilities at fair value, as required by ASC Topic 815, Derivatives and Hedging.

For cash flow hedges, the effective portion of the gain or loss related to the derivative instrument is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. The ineffective portion of the gain or loss is reported in earnings immediately. In applying hedge accounting for derivatives, the Company establishes and documents a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. The Company has designated interest rate swaps in a cash flow hedge to convert forecasted variable interest payments to a fixed rate on its junior subordinated debt and has concluded that the forecasted transactions are probable of occurring.

For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.

Information pertaining to outstanding derivative instruments is as follows:

	Balance Sheet Location	Asset Derivatives Fair Value				Balance Sheet Location	Liability Derivatives Fair Value
(Dollars in thousands)		December 31, 2015		December 31, 2014			December 31, 2015		December 31, 2014
Derivatives designated as hedging instruments under ASC Topic 815:
Interest rate contracts	Other assets	$	58	$	—	Other liabilities	$	—	$	—
Total derivatives designated as hedging instruments under ASC Topic 815		$	58	$	—		$	—	$	—
Derivatives not designated as hedging instruments under ASC Topic 815:
Interest rate contracts	Other assets	$	18,077	$	15,434	Other liabilities	$	18,077	$	15,434
Foreign exchange contracts	Other assets	156		—		Other liabilities	134		—
Forward sales contracts	Other assets	1,588		25		Other liabilities	474		2,556
Written and purchased options	Other assets	10,607		17,444		Other liabilities	6,254		13,364
Total derivatives not designated as hedging instruments under ASC Topic 815		$	30,428	$	32,903		$	24,939	$	31,354
Total		$	30,486	$	32,903		$	24,939	$	31,354
		Asset Derivatives Notional Amount					Liability Derivatives Notional Amount
(Dollars in thousands)		December 31, 2015		December 31, 2014			December 31, 2015		December 31, 2014
Derivatives designated as hedging instruments under ASC Topic 815:
Interest rate contracts		$	108,500	$	—		$	—	$	—
Total derivatives designated as hedging instruments under ASC Topic 815		$	108,500	$	—		$	—	$	—
Derivatives not designated as hedging instruments under ASC Topic 815:
Interest rate contracts		$	590,334	$	444,703		$	590,334	$	444,703
Foreign exchange contracts		4,392		—			4,392		—
Forward sales contracts		223,841		15,897			173,430		391,992
Written and purchased options		328,210		362,580			181,949		225,741
Total derivatives not designated as hedging instruments under ASC Topic 815		$	1,146,777	$	823,180		$	950,105	$	1,062,436
Total		$	1,255,277	$	823,180		$	950,105	$	1,062,436

The Company is party to collateral agreements with certain derivative counterparties. Such agreements require that the Company maintain collateral based on the fair values of individual derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral.

At December 31, 2015 and 2014, the Company was required to post $21.8 million and $11.5 million, respectively, in cash as collateral for its derivative transactions, which are included in "interest-bearing deposits in banks" on the Company’s consolidated balance sheets. The Company does not anticipate additional assets will be required to be posted as collateral, nor does it believe additional assets would be required to settle its derivative instruments immediately if contingent features were triggered at December 31, 2015. The Company’s master netting agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. As permitted by U.S. GAAP, the Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against recognized fair value amounts of derivatives executed with the same counterparty under a master netting agreement. The following table reconciles the gross amounts presented in the consolidated balance sheets to the net amounts that would result in the event of offset.

	December 31, 2015
	Gross Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet					Net
(Dollars in thousands)			Derivatives		Collateral (1)
Derivatives subject to master netting arrangements
Derivative assets
Interest rate contracts designated as hedging instruments	$	58	$	—	$	(45	)	$	13
Interest rate contracts not designated as hedging instruments	18,058		—		—			18,058
Written and purchased options	6,277		—		—			6,277
Total derivative assets subject to master netting arrangements	$	24,393	$	—	$	(45	)	$	24,348
Derivative liabilities
Interest rate contracts not designated as hedging instruments	18,058		—		(9,428		)	8,630
Total derivative liabilities subject to master netting arrangements	$	18,058	$	—	$	(9,428	)	$	8,630

(1) Consists of cash collateral recorded at cost, which approximates fair value, and investment securities.

	December 31, 2014
	Gross Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet					Net
(Dollars in thousands)			Derivatives		Collateral (1)
Derivatives subject to master netting arrangements
Derivative assets
Interest rate contracts designated as hedging instruments	$	—	$	—	$	—		$	—
Interest rate contracts not designated as hedging instruments	15,411		—		—			15,411
Written and purchased options	13,387		—		—			13,387
Total derivative assets subject to master netting arrangements	$	28,798	$	—	$	—		$	28,798
Derivative liabilities
Interest rate contracts not designated as hedging instruments	15,411		—		(3,735		)	11,676
Total derivative liabilities subject to master netting arrangements	$	15,411	$	—	$	(3,735	)	$	11,676

(1) Consists of cash collateral recorded at cost, which approximates fair value, and investment securities.

During the years ended December 31, 2015 and 2014, the Company has not reclassified into earnings any gain or loss as a result of the discontinuance of cash flow hedges, because it was probable the original forecasted transaction would not occur by the end of the originally specified term.

At December 31, 2015, the Company does not expect to reclassify any amount from accumulated other comprehensive income into interest income over the next twelve months for derivatives that will be settled.

At December 31, 2015, 2014, and 2013, and for the years then ended, information pertaining to the effect of the hedging instruments on the consolidated financial statements is as follows:

																Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
			Amount of Gain (Loss) Recognized in OCI net of taxes (Effective Portion)					Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands)
			For the Years Ended December 31
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships			2015	2014		2013				2015	2014		2013				2015		2014			2013
	Interest rate contracts	$	38	$	—	$	619	Other income (expense)	$	—	$	—	$	(391	)	Other income (expense)	$	—	$	(1	)	$	1
Total		$	38	$	—	$	619		$	—	$	—	$	(391	)		$	—	$	(1	)	$	1

Information pertaining to the effect of derivatives not designated as hedging instruments on the consolidated financial statements as of December 31, is as follows:

	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
(Dollars in thousands)		2015			2014			2013
Interest rate contracts	Other income	$	4,143		$	2,513		$	2,991
Foreign exchange contracts	Other income	22			—			—
Forward sales contracts	Mortgage Income	(2,947		)	(3,225		)	(1,716		)
Written and purchased options	Mortgage Income	274			(5,739		)	(3,032		)
Total		$	1,492		$	(6,451	)	$	(1,757	)

At December 31, additional information pertaining to outstanding interest rate swap agreements not designated as hedging instruments is as follows:

(Dollars in thousands)	2015			2014			2013
Weighted average pay rate	3.2		%	2.9		%	3.0		%
Weighted average receive rate	0.9		%	0.4		%	0.2		%
Weighted average maturity in years	7.5 years			7.7 years			7.6 years
Unrealized gain (loss) relating to interest rate swaps	$	—		$	—		$	—