Derivative Instruments

Derivative instruments, recognized at fair value within other assets or accrued expenses and other liabilities on the Consolidated Statements of Financial Condition, were as follows:



	At December 31, 2018
			Fair Value
(In thousands)	Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate contract	$	150,000	$	393		$	—
Forward foreign exchange contracts	157,271		2,980			—
Total derivatives designated as hedging instruments			3,373			—
Derivatives not designated as hedging instruments:
Interest rate contracts	1,095,449		7,516			3,732
Forward foreign exchange contracts	254,274		3,709			13
Interest rate lock commitments	28,007		652			28
Other contracts	13,020		—			583
Total derivatives not designated as hedging instruments			11,877			4,356
Total derivatives before netting			15,250			4,356
Netting⁽¹⁾			(6,982		)	(991		)
Total derivatives, net			$	8,268		$	3,365



	At December 31, 2017
			Fair Value
(In thousands)	Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate contract	$	150,000	$	405		$	—
Forward foreign exchange contracts	77,879		—			1,744
Total derivatives designated as hedging instruments			405			1,744
Derivatives not designated as hedging instruments:
Interest rate contracts	592,383		1,392			1,688
Forward foreign exchange contracts	330,928		—			4,619
Interest rate lock commitments	18,015		223			—
Other contracts	13,804		—			615
Total derivatives not designated as hedging instruments			1,615			6,922
Total derivatives before netting			2,020			8,666
Netting⁽¹⁾			(457		)	(7,098		)
Total derivatives, net			$	1,563		$	1,568


(1)	Includes balance sheet netting of derivative asset and derivative liability balances, related cash collateral and portfolio level counterparty valuation adjustments.

Derivative instruments may be subject to master netting arrangements and collateral arrangements and qualify for offset in the Consolidated Statements of Financial Condition. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. Derivative instruments subject to master netting arrangements and collateral arrangements are recognized on a net basis in the Consolidated Statements of Financial Condition. The gross amounts recognized, gross amounts offset and net amount presented of derivative instruments were as follows:



	At December 31, 2018
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset⁽¹⁾			Net Amount Presented
Derivative assets:
Interest rate contracts	$	7,909	$	(395	)	$	7,514
Forward foreign exchange contracts	6,689		(6,587		)	102
Interest rate lock commitments	652		—			652
Total derivative assets	$	15,250	$	(6,982	)	$	8,268
Derivative liabilities:
Interest rate contracts	$	3,732	$	(395	)	$	3,337
Forward foreign exchange contracts	13		(13		)	—
Interest rate lock commitments	28		—			28
Other contracts	583		(583		)	—
Total derivative liabilities	$	4,356	$	(991	)	$	3,365



	At December 31, 2017
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset⁽¹⁾			Net Amount Presented
Derivative assets:
Interest rate contracts	$	1,797	$	(457	)	$	1,340
Interest rate lock commitments	223		—			223
Total derivative assets	$	2,020	$	(457	)	$	1,563
Derivative liabilities:
Interest rate contracts	$	1,688	$	(457	)	$	1,231
Forward foreign exchange contracts	6,363		(6,026		)	337
Other contracts	615		(615		)	—
Total derivative liabilities	$	8,666	$	(7,098	)	$	1,568


(1)	Includes the amounts with counterparties subject to enforceable master netting arrangements that have been offset in the Consolidated Statements of Financial Condition.

Derivatives Designated as Hedging Instruments

Interest Rate Contract TCF Bank entered into an interest rate swap agreement which was designated as a fair value hedge of its contemporaneously issued subordinated debt. The interest rate swap agreement effectively converts the fixed interest rate to a floating rate based on the three-month LIBOR plus a fixed number of basis points on the $150.0 million notional amount. The carrying amount of the hedged subordinated debt including the cumulative basis adjustment related to the application of fair value hedge accounting is recorded in Long-term borrowings on the Consolidated Statements of Financial Condition and was as follows:



	Carrying Amount of the Hedged Liability				Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Liability
	At December 31,				At December 31,
(In thousands)	2018		2017		2018			2017
Subordinated bank note - 2025	$	144,296	$	146,095	$	(4,165	)	$	(2,157	)

The gain (loss) related to the fair value hedge and the line within the Consolidated Statements of Income where the gain (loss) was recorded were as follows:



	Year Ended December 31,
(In thousands)	2018			2017			2016
Gain (loss) of fair value hedge:
Hedged item	$	2,163		$	808		$	1,140
Derivative designated as a hedging instrument	(2,275		)	(609		)	(1,178		)
Income statement line where the gain (loss) on the fair value hedge was recorded:
Interest expense - borrowings	$	43,144		$	—		$	—
Other non-interest income	—			11,646			8,883

Forward Foreign Exchange Contracts Certain of TCF's forward foreign exchange contracts are used to manage the foreign exchange risk associated with the Company's net investment in TCFCFC. These forward foreign exchange contracts have been designated as net investment hedges. The effect of net investment hedges on accumulated other comprehensive income was as follows:



	Year Ended December 31,
(In thousands)	2018		2017			2016
Forward foreign exchange contracts	$	13,762	$	(4,430	)	$	(1,213	)

Derivatives Not Designated as Hedging Instruments Certain other interest rate contracts, forward foreign exchange contracts, interest rate lock commitments and other contracts have not been designated as hedging instruments. The effect of these derivatives on the Consolidated Statements of Income was as follows:



		Year Ended December 31,
(In thousands)	Location of Gain (Loss)	2018			2017			2016
Interest rate contracts	Other non-interest income	$	(409	)	$	(268	)	$	71
Forward foreign exchange contracts	Other non-interest expense	23,707			(15,748		)	(13,689		)
Interest rate lock commitments	Gains on sales of loans, net	806			(73		)	(419		)
Other contracts	Other non-interest expense	(274		)	(311		)	(629		)
Net gain (loss) recognized		$	23,830		$	(16,400	)	$	(14,666	)

TCF executes all of its forward foreign exchange contracts in the over-the-counter market with large financial institutions pursuant to International Swaps and Derivatives Association, Inc. agreements. These agreements include credit risk-related features that enhance the creditworthiness of these instruments, as compared with other obligations of the respective counterparty with whom TCF has transacted, by requiring that additional collateral be posted under certain circumstances. The amount of collateral required depends on the contract and is determined daily based on market and currency exchange rate conditions.

At December 31, 2018 and 2017, credit risk-related contingent features existed on forward foreign exchange contracts with a notional value of $25.7 million and $39.8 million, respectively. In the event TCF is rated less than BB- by Standard and Poor's, the contracts could be terminated or TCF may be required to provide approximately $0.5 million and $0.8 million in additional collateral at December 31, 2018 and 2017, respectively. There were no forward foreign exchange contracts containing credit risk-related features in a liability position at December 31, 2018 and $0.4 million at December 31, 2017.

At December 31, 2018, TCF had posted $9.1 million and $1.3 million of cash collateral related to its interest rate contracts and other contracts, respectively, and had received $6.7 million of cash collateral related to its forward foreign exchange contracts.