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Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Total Notional or Contractual Amounts, Fair Value, Collateral and Net Exposure of Derivative Financial Instruments
The total notional or contractual amounts and fair value of our derivative financial instruments at September 30, 2018 and December 31, 2017 were as follows:
 
 
September 30, 2018
 
December 31, 2017
 
 
Notional or
Contractual
Amount
 
Fair Value
 
Notional or
Contractual
Amount
 
Fair Value
(Dollars in thousands)
 

Derivative Assets (1)

Derivative Liabilities (1)
 
 
Derivative Assets (1)

Derivative Liabilities (1)
Derivatives not designated as hedging instruments:
 





 

 
 


 Currency exchange risks:
 





 

 
 


Foreign exchange forwards
 
$
241,360


$
2,842


$
—

 
$
50,889

 
$
414


$
—

Foreign exchange forwards
 
397,153


—


4,370

 
425,055

 
—


5,201

 Other derivative instruments:
 


 

 
 

 
 

 
Equity warrant assets
 
223,868


146,967


—

 
211,253

 
123,763


—

Client foreign exchange forwards
 
2,523,524


77,585


—

 
2,203,643

 
95,035


—

Client foreign exchange forwards
 
2,390,294


—


70,317

 
2,092,207

 
—


90,253

Client foreign currency options
 
91,125


1,476


—

 
102,678

 
1,187


—

Client foreign currency options
 
91,149


—


1,478

 
102,678

 
—


1,187

Client interest rate derivatives (2)
 
937,808


6,262


—

 
726,984

 
11,753


—

Client interest rate derivatives
 
1,335,830


—


15,156

 
782,586

 
—


11,940

Total Derivatives not designated as hedging instruments
 
 
 
$
235,132


$
91,321

 
 
 
$
232,152


$
108,581

 
 
(1)
Derivative assets and liabilities are included in "accrued interest receivable and other assets" and "other liabilities", respectively, on our consolidated balance sheets.
(2)
The amount reported for September 30, 2018 reflects rule changes implemented by two central clearing houses that allow entities to elect to treat derivative assets, liabilities and the related variation margin as settlement of the related derivative fair values for legal and accounting purposes, as opposed to presenting gross derivative assets and liabilities. As a result, client interest rate derivatives at September 30, 2018, reflect reductions of approximately $8.7 million of derivative assets that previously would have been reported on a gross basis and approximately $302.4 million in related notional amounts for these derivative assets cleared through central clearing houses.
Summary of Derivative Activity and Related Impact on Consolidated Statements of Income
A summary of our derivative activity and the related impact on our consolidated statements of income for the three and nine months ended September 30, 2018 and 2017 is as follows:
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Dollars in thousands)
 
Statement of income location   
 
2018
 
2017
 
2018
 
2017
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 Interest rate risks:
 
 
 
 
 
 
 
 
 
 
Net cash benefit associated with interest rate swaps
 
Interest expense—borrowings
 
$
—

 
$
62

 
$
—

 
$
997

Changes in fair value of interest rate swaps
 
Other noninterest income
 
—

 
—

 
—

 
(7
)
Net gains associated with interest rate risk derivatives
 
 
 
$
—

 
$
62

 
$
—

 
$
990

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 Currency exchange risks:
 
 
 
 
 
 
 
 
 
 
Gains on revaluations of internal foreign currency instruments, net
 
Other noninterest income
 
$
5,412

 
$
10,561

 
$
8,019

 
$
29,265

(Losses) on internal foreign exchange forward contracts, net
 
Other noninterest income
 
(5,002
)
 
(10,550
)
 
(8,055
)
 
(28,349
)
Net gains (losses) associated with internal currency risk
 
 
 
$
410

 
$
11

 
$
(36
)
 
$
916

 Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
(Losses) gains on revaluations of client foreign currency instruments, net
 
Other noninterest income
 
$
(1,187
)
 
$
3,760

 
$
3,718

 
$
8,889

Gains (losses) on client foreign exchange forward contracts, net
 
Other noninterest income
 
1,573

 
(3,871
)
 
(2,697
)
 
(8,350
)
Net gains (losses) associated with client currency risk
 
 
 
$
386

 
$
(111
)
 
$
1,021

 
$
539

Net gains on equity warrant assets
 
Gains on equity warrant assets, net
 
$
34,141

 
$
24,922

 
$
72,393

 
$
42,432

Net gains (losses) on other derivatives
 
Other noninterest income
 
$
222

 
$
(38
)
 
$
643

 
$
(524
)
Offsetting Assets
The following table summarizes our assets subject to enforceable master netting arrangements as of September 30, 2018 and December 31, 2017:
 
 
Gross Amounts of Recognized Assets
 
Gross Amounts offset in the Statement of Financial Position
 
Net Amounts of Assets Presented in the Statement of Financial Position
 
Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements
 
Net Amount
(Dollars in thousands)
 
 
 
 
Financial Instruments
 
Cash Collateral Received (1)
 
September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards
 
$
80,427

 
$
—

 
$
80,427

 
$
(29,400
)
 
$
(6,816
)
 
$
44,211

   Foreign currency options
 
1,476

 
—

 
1,476

 
(811
)
 
—

 
665

   Client interest rate derivatives
 
6,262

 
—

 
6,262

 
(3,365
)
 
(2,897
)
 
—

Total derivative assets
 
88,165

 
—

 
88,165

 
(33,576
)
 
(9,713
)
 
44,876

Reverse repurchase, securities borrowing, and similar arrangements
 
119,181

 
—

 
119,181

 
(119,181
)
 
—

 
—

Total
 
$
207,346

 
$
—

 
$
207,346

 
$
(152,757
)
 
$
(9,713
)
 
$
44,876

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards (2)
 
$
95,449

 
$
—

 
$
95,449

 
$
(14,570
)
 
$
(3,616
)
 
$
77,263

   Foreign currency options
 
1,187

 
—

 
1,187

 
(557
)
 
—

 
630

   Client interest rate derivatives (2)
 
11,753

 
—

 
11,753

 
(11,627
)
 
(114
)
 
12

Total derivative assets
 
108,389

 
—

 
108,389

 
(26,754
)
 
(3,730
)
 
77,905

Reverse repurchase, securities borrowing, and similar arrangements
 
247,876

 
—

 
247,876

 
(247,876
)
 
—

 
—

Total
 
$
356,265

 
$
—

 
$
356,265

 
$
(274,630
)
 
$
(3,730
)
 
$
77,905


 
 
(1)
Cash collateral received from our counterparties in relation to market value exposures of derivative contracts in our favor is recorded as a component of “short-term borrowings” on our consolidated balance sheets.
(2)
For the period ending December 31, 2017, previously reported amounts for our foreign exchange forwards and client interest rate derivatives were reclassified between "Financial Instruments" and "Cash Collateral Received" to properly reflect cash collateral received for these derivative assets subject to master netting arrangements, respectively. The
Offsetting Liabilities
The following table summarizes our liabilities subject to enforceable master netting arrangements as of September 30, 2018 and December 31, 2017:
 
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts offset in the Statement of Financial Position
 
Net Amounts of Liabilities Presented in the Statement of Financial Position
 
Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements
 
Net Amount
(Dollars in thousands)
 
 
 
 
Financial Instruments
 
Cash Collateral Pledged (1)
 
September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
   Foreign exchange forwards
 
$
74,687

 
$
—

 
$
74,687

 
$
(22,038
)
 
$
(20,036
)
 
$
32,613

   Foreign currency options
 
1,478

 
—

 
1,478

 
(666
)
 
—

 
812

   Client interest rate derivatives
 
15,156

 
—

 
15,156

 
(4,882
)
 
(10,180
)
 
94

Total derivative liabilities
 
91,321

 
—

 
91,321

 
(27,586
)
 
(30,216
)
 
33,519

Repurchase, securities lending, and similar arrangements
 
371,539

 
—

 
371,539

 
(147,757
)
 
(750
)
 
223,032

Total
 
$
462,860

 
$
—

 
$
462,860

 
$
(175,343
)
 
$
(30,966
)
 
$
256,551

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
   Foreign exchange forwards (2)
 
$
95,454

 
$
—

 
$
95,454

 
$
(10,997
)
 
$
(69,110
)
 
$
15,347

   Foreign currency options (2)
 
1,187

 
—

 
1,187

 
(501
)
 
(130
)
 
556

   Client interest rate derivatives (2)
 
11,940

 
—

 
11,940

 
—

 
(11,924
)
 
16

Total derivative liabilities (2)
 
108,581

 
—

 
108,581

 
(11,498
)
 
(81,164
)
 
15,919

Repurchase, securities lending, and similar arrangements
 
—

 
—

 
—

 
—

 
—

 
—

Total (2)
 
$
108,581

 
$
—

 
$
108,581

 
$
(11,498
)
 
$
(81,164
)
 
$
15,919


 
 
(1)
Cash collateral pledged to our counterparties in relation to market value exposures of derivative contracts in a liability position and repurchase agreements are recorded as a component of “cash and cash equivalents" on our consolidated balance sheets.
(2)
For the period ending December 31, 2017, previously reported amounts included in "Financial Instruments" were reclassified to "Cash Collateral Pledged" to properly reflect cash collateral pledged for these derivative liabilities subject to master netting arrangements. The correction of this immaterial error had no impact on the "Net Amount" of derivative liabilities subject to enforceable master netting arrangements.