We primarily use derivative financial instruments to manage interest rate risk and currency exchange rate risk and to assist customers with their risk management objectives, which may include currency exchange rate risks and interest rate risks. Also, in connection with negotiating credit facilities and certain other services, we often obtain equity warrant assets giving us the right to acquire stock in private, venture-backed companies in the technology and life science/healthcare industries.

Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our interest rate sensitive assets and liabilities and changes in market interest rates. To manage interest rate risk on our interest rate sensitive assets, we have entered into interest rate swap contracts to hedge against future changes in interest rates. We designate these interest rate swap contracts as fair value and cash flow hedges.

To manage interest rate risk on our available-for-sale securities portfolio, we enter into pay-fixed, receive-floating interest rate swap contracts to hedge against exposure to changes in the fair value of the securities resulting from changes in interest rates. We designate these interest rate swap contracts as fair value hedges that qualify for hedge accounting under ASC 815, Derivatives and Hedging ("ASC 815") and have elected to account for them using the last-of-layer method as outlined in ASC 815. We record the fair value hedges in other assets and other liabilities. For qualifying fair value hedges, both the changes in the fair value of the derivative and the portion of the fair value adjustments associated with the last-of-layer attributable to the hedged risk will be recognized into earnings as they occur. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item in the line item "investment securities" as part of interest income, a component of consolidated net income.

We assess hedge effectiveness under ASC 815 on a quarterly basis to ensure all hedges remain highly effective and hedge accounting under ASC 815 can be applied. In conjunction with the assessment of effectiveness, we assess the hedged item to ensure it is expected to be outstanding at the hedged item’s assumed maturity date and the last-of-layer method of accounting under ASC 815 can be applied. If the hedging relationship no longer exists or no longer qualifies as a hedge per ASC 815, any remaining fair value basis adjustments are allocated to the individual assets in the portfolio and amortized into earnings over a period consistent with the amortization of other discounts and premiums associated with the respective assets.

The following table summarizes the amortized cost basis of hedged assets that are designated and qualify as fair value hedges and the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded on our consolidated balance sheets as of March 31, 2021:

(1)These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At March 31, 2021, the amortized cost basis of the closed portfolios used in these hedging relationships was $21.3 billion, the amounts of the designated hedged items was $10.0 billion and the cumulative basis adjustments associated with these hedging relationships was $17.0 million.

To manage interest rate risk on our variable-interest rate loan portfolio, we enter into interest rate swap contracts to hedge against future changes in interest rates by using hedging instruments to lock in future cash inflows that would otherwise be impacted by movements in the market interest rates. We designate these interest rate swap contracts as cash flow hedges that qualify for hedge accounting under ASC 815 and record them in other assets and other liabilities. For qualifying cash flow hedges, changes in the fair value of the derivative are recorded in accumulated other comprehensive income and recognized in earnings as the hedged item affects earnings. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item in the line item "Loans" as part of interest income, a component of consolidated net income.

We assess hedge effectiveness under ASC 815 on a quarterly basis to ensure all hedges remain highly effective and hedge accounting under ASC 815 can be applied. If the hedging relationship no longer exists or no longer qualifies as a hedge per ASC 815, any amounts remaining as gain or loss in accumulated other comprehensive income are reclassified into earnings in the line item "Loans" as part of interest income, a component of consolidated net income. As of March 31, 2020, all derivatives previously classified as hedges with notional balances totaling $5.0 billion and a net asset fair value of $227.5 million were terminated. As of March 31, 2021, the total unrealized gains on terminated cash flow hedges remaining in AOCI was $163.4 million, $118.0 million net of tax. The unrealized gains will be reclassified into interest income as the underlying forecasted transactions impact earnings through the original maturity of the hedged forecasted transactions. The total remaining term over which the unrealized gains will be reclassified into earnings is approximately four years.

We enter into foreign exchange forward contracts to economically reduce our foreign exchange exposure risk associated with the net difference between foreign currency denominated assets and liabilities. We do not designate any foreign exchange forward contracts as derivative instruments that qualify for hedge accounting. Gains or losses from changes in currency rates on foreign currency denominated instruments are recorded in the line item “other” as part of noninterest

income, a component of consolidated net income. We may experience ineffectiveness in the economic hedging relationship, because the instruments are revalued based upon changes in the currency’s spot rate on the principal value, while the forwards are revalued on a discounted cash flow basis. We record forward agreements in gain positions in other assets and loss positions in other liabilities, while net changes in fair value are recorded in the line item “other” as part of noninterest income, a component of consolidated net income.

Also included in our derivative instruments are equity warrant assets and client forward and option contracts, and client interest rate contracts. For further description of these other derivative instruments, refer to Note 2 — “Summary of Significant Accounting Policies" under Part II, Item 8 of our 2020 Form 10-K.

We are exposed to credit risk if counterparties to our derivative contracts do not perform as expected. We mitigate counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral, as appropriate. With respect to measuring counterparty credit risk for derivative instruments, we measure the fair value of a group of financial assets and financial liabilities on a net risk basis by counterparty portfolio.


	March 31, 2021						December 31, 2020
	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 designated as hedging instruments:
Interest rate risks:
Interest rate swaps (2)	$	10,000,000	$	—	$	—	$	—	$	—	$	—
Interest rate swaps	—		—		—		—		—		—
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange forwards	687,576		19,109		—		68,381		306		—
Foreign exchange forwards	97,950		—		2,626		566,988		—		20,566
Other derivative instruments:
Equity warrant assets	299,101		244,334		—		253,153		203,438		—
Client foreign exchange forwards	9,015,147		220,034		—		8,025,973		214,969		—
Client foreign exchange forwards	8,675,502		—		198,866		7,490,723		—		188,565
Client foreign currency options	63,503		1,040		—		97,529		1,702		—
Client foreign currency options	63,503		—		1,040		97,522		—		1,702
Client interest rate derivatives (2)	1,212,842		65,123		—		1,082,265		67,854		—
Client interest rate derivatives (2)	1,381,626		—		68,954		1,250,975		—		26,646
Total derivatives not designated as hedging instruments			549,640		271,486				488,269		237,479
Total derivatives			$	549,640	$	271,486			$	488,269	$	237,479

(2)The amount reported reflects reductions of approximately $22.7 million of derivative assets and $45.4 million of derivative liabilities at March 31, 2021 and December 31, 2020, respectively, reflecting variation margin treated as settlement of the related derivative fair values for legal and accounting purposes as required by central clearing houses.


		Three months ended March 31,
(Dollars in thousands)	Statement of income location	2021		2020
Derivatives designated as hedging instruments:
Interest rate risks:
Amounts reclassified from accumulated other comprehensive income into income	Interest income - loans	$	15,657	$	2,089
Change in fair value of interest rate swaps hedging investment securities	Interest income - investment securities taxable	18,494		—
Change in fair value of hedged investment securities	Interest income - investment securities taxable	(16,975)		—
Net gains associated with interest rate risk derivatives		$	17,176	$	2,089
Derivatives not designated as hedging instruments:
Currency exchange risks:
Losses on revaluations of internal foreign currency instruments, net	Other noninterest income	$	(28,129)	$	(8,375)
Gains on internal foreign exchange forward contracts, net	Other noninterest income	26,853		8,668
Net (losses) gains associated with internal currency risk		$	(1,276)	$	293
Other derivative instruments:
Losses on revaluations of client foreign currency instruments, net	Other noninterest income	$	(2,427)	$	(8,284)
Gains on client foreign exchange forward contracts, net	Other noninterest income	2,751		7,747
Net gains (losses) associated with client currency risk		$	324	$	(537)
Net gains on equity warrant assets	Gains on equity warrant assets, net	$	221,685	$	13,395
Net gains (losses) on other derivatives	Other noninterest income	$	4,521	$	(4,345)

Certain of our derivative and other financial instruments are subject to enforceable master netting arrangements with our counterparties. These agreements provide for the net settlement of multiple contracts with a single counterparty through a single payment, in a single currency, in the event of default on or termination of any one contract.


	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)
March 31, 2021
Derivative assets:

Foreign exchange forwards	$	239,143	$	—	$	239,143	$	(77,667)	$	(38,286)	$	123,190
Foreign currency options	1,040		—		1,040		(413)		(148)		479
Client interest rate derivatives	65,123		—		65,123		(65,123)		—		—
Total derivative assets	305,306		—		305,306		(143,203)		(38,434)		123,669
Reverse repurchase, securities borrowing, and similar arrangements	288,438		—		288,438		(288,438)		—		—
Total	$	593,744	$	—	$	593,744	$	(431,641)	$	(38,434)	$	123,669
December 31, 2020
Derivative assets:

Foreign exchange forwards	$	215,275	$	—	$	215,275	$	(75,983)	$	(20,550)	$	118,742
Foreign currency options	1,702		—		1,702		(1,045)		(3)		654
Client interest rate derivatives	67,854		—		67,854		(67,854)		—		—
Total derivative assets	284,831		—		284,831		(144,882)		(20,553)		119,396
Reverse repurchase, securities borrowing, and similar arrangements	226,847		—		226,847		(226,847)		—		—
Total	$	511,678	$	—	$	511,678	$	(371,729)	$	(20,553)	$	119,396


	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)
March 31, 2021
Derivative liabilities:

Foreign exchange forwards	$	201,492	$	—	$	201,492	$	(61,303)	$	(58,582)	$	81,607
Foreign currency options	1,040		—		1,040		(491)		—		549
Client interest rate derivatives	68,954		—		68,954		(53,003)		(15,570)		381
Total derivative liabilities	271,486		—		271,486		(114,797)		(74,152)		82,537
Repurchase, securities lending, and similar arrangements	—		—		—		—		—		—
Total	$	271,486	$	—	$	271,486	$	(114,797)	$	(74,152)	$	82,537
December 31, 2020
Derivative liabilities:

Foreign exchange forwards	$	209,131	$	—	$	209,131	$	(84,547)	$	(45,367)	$	79,217
Foreign currency options	1,702		—		1,702		(645)		(8)		1,049
Client interest rate derivatives	26,646		—		26,646		—		(26,100)		546
Total derivative liabilities	237,479		—		237,479		(85,192)		(71,475)		80,812
Repurchase, securities lending, and similar arrangements	—		—		—		—		—		—
Total	$	237,479	$	—	$	237,479	$	(85,192)	$	(71,475)	$	80,812