The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to select pools of variable rate loans and fixed rate brokered deposits. The Bank also enters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net risk exposure resulting from such agreements. The Bank also enters into risk participation agreements under which it may either sell or buy credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.

The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets at June 30, 2019 and December 31, 2018.

		June 30, 2019								December 31, 2018
				Derivative ⁽¹⁾								Derivative ⁽¹⁾
(in thousands)	Type of Hedge	Notional or Contractual Amount		Assets			Liabilities			Notional or Contractual Amount		Assets			Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	Cash Flow	$	1,075,000	$	25,328		$	—		$	875,000	$	3,954		$	9,173
Interest rate swaps	Fair Value		163,110		—			290			483,110		—			2,089
			1,238,110		25,328			290			1,358,110		3,954			11,262
Derivatives not designated as hedging instruments:
Interest rate swaps ⁽²⁾	N/A		1,495,638		51,255			52,573			1,277,404		23,670			24,669
Risk participation agreements	N/A		181,100		11			70			171,222		10			131
Forward commitments to sell residential mortgage loans	N/A		124,987		48			742			77,208		110			664
Interest rate-lock commitments on residential mortgage loans	N/A		91,325		576			42			59,119		464			67
Foreign exchange forward contracts	N/A		40,230		466			434			37,749		751			718
Visa Class B derivative contract	N/A		43,753		—			6,602			43,753		—			7,304
			1,977,033		52,356			60,463			1,666,455		25,005			33,553
Total derivatives		$	3,215,143	$	77,684		$	60,753		$	3,024,565	$	28,959		$	44,815
Less: netting adjustment ⁽³⁾					(26,075	)		(41,505	)				(11,979	)		(22,588	)
Total derivative assets/liabilities				$	51,609		$	19,248				$	16,980		$	22,227

The Company is party to various interest rate swap agreements designated and qualifying as cash flow hedges of the Company’s forecasted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. During the six months ended June 30, 2018, the Company terminated five of its shorter-term swap agreements with notional amounts totaling $450 million and entered into five longer-term agreements with notional amounts totaling $450 million. The Company paid termination fees of approximately $10.6 million to settle the interest rate swap liabilities, and the resulting accumulated other comprehensive loss is being amortized over the remaining maturities of the designated instruments. Amortization of other comprehensive loss on terminated cash flow hedges totaled $2.5 million for each of the six months ended June 30, 2019 and 2018. The notional amounts of the swap agreements in place at June 30, 2019 expire as follows: $50 million in 2021; $475 million in 2022; $450 million in 2023; and $100 million in 2024.

The Company enters into interest rate swap agreements that modify the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps match the features of the hedged deposits. As interest rates fall, the decline in the value of the certificates of deposit is offset by the increase in the value of the interest rate swaps. Conversely, as interest rates rise, the value of the underlying hedged deposits increases, but the value of the interest rate swaps decreases, resulting in no impact on earnings. Interest expense is adjusted by the difference between the fixed and floating rates for the period the swaps are in effect.

The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan agreement. The Bank manages its credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on the Bank’s normal credit review process.

The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis.

The Bank enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes when Visa deposits funds to a litigation escrow account established by Visa to pay settlements for certain litigation, for which Visa is indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters, the timing of which is uncertain.

The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At June 30, 2019 and December 31, 2018 the fair value of the liability associated with this contract was $6.6 million and $7.3 million, respectively. Refer to Note 15 – Fair Value of Financial Instruments for discussion of the valuation inputs for this derivative liability.

The effects of derivative instruments on the consolidated statements of income for the three and six months ended June 30, 2019 and 2018 are presented in the table below. For the three and six months ended June 30, 2019 and 2018, the reduction of interest income attributable to cash flow hedges includes amortization of accumulated other comprehensive loss that resulted from termination of five interest rate swap contracts.

		Three Months Ended						Six Months
		June 30,						June 30,
Derivative Instruments:	Location of Gain (Loss) Recognized in the Statement of Income:	2019			2018			2019			2018
Interest rate swaps - cash flow hedges	Interest income	$	(1,660	)	$	(946	)	$	(3,676	)	$	(1,565	)
Interest rate swaps - fair value hedges	Interest expense	$	(461	)		(519	)		(1,449	)		(646	)
All other instruments	Other noninterest income	$	3,600			1,588			4,409			3,111
Total		$	1,479		$	123		$	(716	)	$	900

Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. At June 30, 2019, the Company was not in violation of any such provisions.

The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at June 30, 2019 and December 31, 2018 is presented in the following tables.

(in thousands)			Gross Amounts			Net Amounts		Gross Amounts Not Offset in the Statement of Income
Description	Gross Amounts Recognized		Offset in the Statement of Income			Presented in the Statement of Income		Financial Instruments		Cash Collateral		Net Amount
As of June 30, 2019
Derivative Assets	$	26,558	$	(26,405	)	$	153	$	153	$	—	$	—
Derivative Liabilities	$	51,833	$	(41,325	)	$	10,508	$	153	$	15,304	$	(4,949	)

(in thousands)			Gross Amounts			Net Amounts		Gross Amounts Not Offset in the Statement of Income
Description	Gross Amounts Recognized		Offset in the Statement of Income			Presented in the Statement of Income		Financial Instruments		Cash Collateral		Net Amount
As of December 31, 2018
Derivative Assets	$	16,167	$	(12,842	)	$	3,325	$	1,846	$	—	$	1,479
Derivative Liabilities	$	23,811	$	(21,651	)	$	2,160	$	1,846	$	2,871	$	(2,557	)

The Company has excess collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.