Derivative Instruments and Other Hedging Activities

9 Months Ended

Sep. 30, 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, asset sensitivity, and other exposures such as liquidity and credit risk. 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.

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:

(Dollars in thousands)		Asset Derivatives Fair Value					Liability Derivatives Fair Value
	Balance Sheet Location	September 30, 2015		December 31, 2014		Balance Sheet Location	September 30, 2015		December 31, 2014
Derivatives designated as hedging instruments under ASC Topic 815:
Interest rate contracts	Other assets	$	—	$	—	Other liabilities	$	575	$	—
Total derivatives designated as hedging instruments under ASC Topic 815		$	—	$	—		$	575	$	—
Derivatives not designated as hedging instruments under ASC Topic 815:
Interest rate contracts	Other assets	$	23,960	$	15,434	Other liabilities	$	23,960	$	15,434
Foreign exchange contracts	Other assets	4,369		—		Other liabilities	4,369		—
Forward sales contracts	Other assets	452		25		Other liabilities	3,108		2,556
Written and purchased options	Other assets	12,659		17,444		Other liabilities	6,135		13,364
Total derivatives not designated as hedging instruments under ASC Topic 815		41,440		32,903			37,572		31,354
Total		$	41,440	$	32,903		$	38,147	$	31,354
(Dollars in thousands)		Asset Derivatives  Notional Amount					Liability Derivatives  Notional Amount
		September 30, 2015		December 31, 2014			September 30, 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		$	565,820	$	444,703		$	565,820	$	444,703
Foreign exchange contracts		4,392		—			4,370		—
Forward sales contracts		55,412		15,897			428,547		391,992
Written and purchased options		361,565		362,580			190,186		225,741
Total derivatives not designated as hedging instruments under ASC Topic 815		987,189		823,180			1,188,923		1,062,436
Total		$	987,189	$	823,180		$	1,297,423	$	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 September 30, 2015 and December 31, 2014, the Company was required to post $27.2 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 September 30, 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.

	September 30, 2015
	Gross Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet
(Dollars in thousands)			Derivatives		Collateral  (1)			Net
Derivatives subject to master netting arrangements
Derivative assets
Interest rate contracts designated as hedging instruments	$	—	$	—	$	—		$	—
Interest rate contracts not designated as hedging instruments	23,959		—		—			23,959
Written and purchased options	6,127		—		—			6,127
Total derivative assets subject to master netting arrangements	$	30,086	$	—	$	—		$	30,086
Derivative liabilities
Interest rate contracts designated as hedging instruments	575		—		(508		)	67
Interest rate contracts not designated as hedging instruments	23,959		—		(14,704		)	9,255
Total derivative liabilities subject to master netting arrangements	$	24,534	$	—	$	(15,212	)	$	9,322

⁽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
(Dollars in thousands)			Derivatives		Collateral  (1)			Net
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 designated as hedging instruments	$	—	$	—	$	—		$	—
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 nine months ended September 30, 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 September 30, 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 September 30, 2015 and 2014, and for the three and nine months 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 Three Months Ended September 30
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships		2015			2014			2015		2014			2015		2014
	Interest rate contracts	$	(3,412	)	$	—	Other income (expense)	$	—	$	—	Other income (expense)	$	—	$	—
Total		$	(3,412	)	$	—		$	—	$	—		$	—	$	—
												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 Nine Months Ended September 30
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships			2015		2014			2015		2014			2015		2014
	Interest rate contracts	$	(374	)	$	—	Other income (expense)	$	—	$	—	Other income (expense)	$	—	$	(1	)
Total		$	(374	)	$	—		$	—	$	—		$	—	$	(1	)

Information pertaining to the effect of derivatives not designated as hedging instruments on the consolidated financial statements for the three and nine months ended September 30, 2015 is as follows:

(Dollars in thousands)		Amount of Gain (Loss) Recognized in Income on Derivatives
	Location of Gain (Loss) Recognized in Income on Derivatives	For the Three Months Ended September 30						For the Nine Months Ended September 30
		2015			2014			2015			2014
Interest rate contracts	Other income	$	1,130		$	406		$	3,069		$	1,971
Forward sales contracts	Mortgage income	(6,524		)	(3,648		)	1,526			(7,512		)
Written and purchased options	Mortgage income	(526		)	773			(1,711		)	2,401
Total		$	(5,920	)	$	(2,469	)	$	2,884		$	(3,140	)