Derivatives

9 Months Ended

Sep. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

(11)	Derivatives

Newmark accounts for its derivatives at fair value and recognized all derivatives as either assets or liabilities on the accompanying unaudited condensed consolidated balance sheets. In its normal course of business, Newmark enters into commitments to extend credit for mortgage loans at a specific rate (rate lock commitments) and commitments to deliver these loans to third-party investors at a fixed price (forward sale contracts). These transactions are accounted for as derivatives.

The fair value of derivative contracts, computed in accordance with Newmark’s netting policy, is set forth below (in thousands):

	As of September 30, 2019								As of December 31, 2018
Derivative contract	Assets			Liabilities		Notional Amounts			Assets			Liabilities		Notional Amounts
Forward sale contracts	$	42,005	⁽¹⁾	$	25,971	$	1,531,459	⁽²⁾	$	85,796	⁽¹⁾	$	9,208	$	1,574,114	⁽²⁾
Rate lock commitments		26,691			1,198		488,664			6,732			7,470		240,720
Total	$	68,696		$	27,169	$	2,020,123		$	92,528		$	16,678	$	1,814,834

(1)

Included in Forwards is $40.4 million and $77.6 million of the Nasdaq Forwards as of September 30, 2019 and December 31, 2018, respectively (See Note 1 — “Organization and Basis of Presentation”). Unrealized gains/(losses) for the change in the fair value of the Nasdaq Forwards for the three months ended September 30, 2019 and 2018 was $(8.2) million and $9.1 million, respectively and $(37.2) million and $6.3 million for the nine months ended September 30, 2019 and 2018, respectively.

(2)

Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of Newmark’s derivative activity, and does not represent anticipated losses. Included in the notional amounts of forwards is $361.0 million for the Nasdaq Forwards as of September 30, 2019 and December 31, 2018.

The change in fair value of rate lock commitments and forward sale contracts related to mortgage loans are reported as part of “Gains from mortgage banking activities/originations, net” on the accompanying unaudited condensed consolidated statements of operations. The change in fair value of rate lock commitments are disclosed net of $(0.2) million and $(1.3) million of commissions for the three months ended September 30, 2019 and 2018, respectively, and $1.6 million and $2.0 million of expenses for the nine months ended September 30, 2019 and 2018, respectively. The change in fair value of rate lock commitments related to commissions are included as part of “Compensation and employee benefits” on the accompanying unaudited condensed consolidated statements of operations.

Gains and losses on derivative contracts which are included on the accompanying unaudited condensed consolidated statements of operations were as follows (in thousands):

	Location of gain (loss) recognized	Three Months Ended September 30,						Nine Months Ended September 30,
	in income for derivatives	2019			2018			2019			2018
Derivatives not designed as hedging instruments:
Nasdaq Forwards	Other income, net	$	(8,214	)	$	9,135		$	(37,181	)	$	6,327
Rate lock commitments	Gains from mortgage banking activities/originations, net		5,734			(7,656	)		27,113			(3,872	)
Rate lock commitments	Compensation and employee benefits		236			1,284			(1,620	)		(1,998	)
Forward sale contracts	Gains from mortgage banking activities/originations, net		12			4,676			(24,404	)		20,478
Total		$	(2,232	)	$	7,439		$	(36,092	)	$	20,935

Derivative assets and derivative liabilities are included in “Other current assets,” “Other assets” and the current portion of “Accounts payable, accrued expenses and other liabilities,” on the accompanying unaudited condensed consolidated balance sheets.