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Securities | 6 Months Ended
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Jun. 30, 2016
Investments, Debt and Equity Securities [Abstract] |
Securities | Securities Securities. A summary of the amortized cost and estimated fair value of securities, excluding trading securities, is presented below.
| June 30, 2016 |  | December 31, 2015
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Held to Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 249,661 |  |  | $ | 5,461 |  |  | $ | — |  |  | $ | 255,122 |  |  | $ | 249,441 |  |  | $ | 7,776 |  |  | $ | — |  |  | $ | 257,217 |
Residential mortgage-backed securities | 5,156 |  |  | 63 |  |  | — |  |  | 5,219 |  |  | 6,456 |  |  | 63 |  |  | 4 |  |  | 6,515 |
States and political subdivisions | 2,083,435 |  |  | 72,954 |  |  | 3,697 |  |  | 2,152,692 |  |  | 2,405,762 |  |  | 46,003 |  |  | 6,149 |  |  | 2,445,616 |
Other | 1,350 |  |  | — |  |  | — |  |  | 1,350 |  |  | 1,350 |  |  | — |  |  | 13 |  |  | 1,337 |
Total | $ | 2,339,602 |  |  | $ | 78,478 |  |  | $ | 3,697 |  |  | $ | 2,414,383 |  |  | $ | 2,663,009 |  |  | $ | 53,842 |  |  | $ | 6,166 |  |  | $ | 2,710,685 |
Available for Sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 3,984,495 |  |  | $ | 135,522 |  |  | $ | — |  |  | $ | 4,120,017 |  |  | $ | 3,980,986 |  |  | $ | 22,041 |  |  | $ | 8,507 |  |  | $ | 3,994,520 |
Residential mortgage-backed securities | 861,794 |  |  | 46,504 |  |  | 113 |  |  | 908,185 |  |  | 1,000,024 |  |  | 42,142 |  |  | 734 |  |  | 1,041,432 |
States and political subdivisions | 4,695,526 |  |  | 277,835 |  |  | 7 |  |  | 4,973,354 |  |  | 3,996,113 |  |  | 133,305 |  |  | 1,459 |  |  | 4,127,959 |
Other | 42,477 |  |  | — |  |  | — |  |  | 42,477 |  |  | 42,447 |  |  | — |  |  | — |  |  | 42,447 |
Total | $ | 9,584,292 |  |  | $ | 459,861 |  |  | $ | 120 |  |  | $ | 10,044,033 |  |  | $ | 9,019,570 |  |  | $ | 197,488 |  |  | $ | 10,700 |  |  | $ | 9,206,358 |
All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. At June 30, 2016, approximately 97.9% of the securities in our municipal bond portfolio were issued by political subdivisions or agencies within the State of Texas, of which approximately 68.1% are either guaranteed by the Texas Permanent School Fund, which has a “triple A” insurer financial strength rating, or secured by U.S. Treasury securities via defeasance of the debt by the issuers. Securities with limited marketability, such as stock in the Federal Reserve Bank and the Federal Home Loan Bank, are carried at cost and are reported as other available for sale securities in the table above. The carrying value of securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law was $3.3 billion at June 30, 2016 and $3.9 billion and December 31, 2015. During the fourth quarter of 2012, we reclassified certain securities from available for sale to held to maturity. The securities had an aggregate fair value of $2.3 billion with an aggregate net unrealized gain of $165.7 million ($107.7 million, net of tax) on the date of the transfer. Some of these securities were sold during the first quarter of 2016, as more fully discussed below. The net unamortized, unrealized gain on the remaining transferred securities included in accumulated other comprehensive income in the accompanying balance sheet as of June 30, 2016 totaled $42.6 million ($27.7 million, net of tax). This amount will be amortized out of accumulated other comprehensive income over the remaining life of the underlying securities as an adjustment of the yield on those securities. Unrealized Losses. As of June 30, 2016, securities with unrealized losses, segregated by length of impairment, were as follows:
| Less than 12 Months |  | More than 12 Months |  | Total
| Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses
Held to Maturity |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
States and political subdivisions | 37,489 |  |  | 512 |  |  | 154,689 |  |  | 3,185 |  |  | 192,178 |  |  | 3,697 |
Total | $ | 37,489 |  |  | $ | 512 |  |  | $ | 154,689 |  |  | $ | 3,185 |  |  | $ | 192,178 |  |  | $ | 3,697 |
Available for Sale |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | 139 |  |  | $ | 3 |  |  | $ | 16,844 |  |  | $ | 110 |  |  | $ | 16,983 |  |  | $ | 113 |
States and political subdivisions | 10,340 |  |  | 7 |  |  | — |  |  | — |  |  | 10,340 |  |  | 7 |
Total | $ | 10,479 |  |  | $ | 10 |  |  | $ | 16,844 |  |  | $ | 110 |  |  | $ | 27,323 |  |  | $ | 120 |
Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and our ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in cost. Management has the ability and intent to hold the securities classified as held to maturity in the table above until they mature, at which time we will receive full value for the securities. Furthermore, as of June 30, 2016, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost. Any unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of June 30, 2016, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in our consolidated income statement. Contractual Maturities. The amortized cost and estimated fair value of securities, excluding trading securities, at June 30, 2016 are presented below by contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage-backed securities and equity securities are shown separately since they are not due at a single maturity date.
| Held to Maturity |  | Available for Sale
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Due in one year or less | $ | 608,032 |  |  | $ | 621,611 |  |  | $ | 59,059 |  |  | $ | 59,905 |
Due after one year through five years | 349,978 |  |  | 371,006 |  |  | 3,778,355 |  |  | 3,873,477 |
Due after five years through ten years | 277,818 |  |  | 287,257 |  |  | 1,204,980 |  |  | 1,282,404 |
Due after ten years | 1,098,618 |  |  | 1,129,290 |  |  | 3,637,627 |  |  | 3,877,585 |
Residential mortgage-backed securities | 5,156 |  |  | 5,219 |  |  | 861,794 |  |  | 908,185 |
Equity securities | — |  |  | — |  |  | 42,477 |  |  | 42,477 |
Total | $ | 2,339,602 |  |  | $ | 2,414,383 |  |  | $ | 9,584,292 |  |  | $ | 10,044,033 |
Sales of Securities. During the first quarter of 2016, a portion of the securities we sold included certain securities that were issued by municipalities and special-purpose districts under municipal control (together referred to as “municipalities”) within the State of Texas that have been significantly impacted by the significant decline in market oil prices due to the fact that their tax bases are heavily reliant on the energy industry relative to other sectors of the economy. Specifically, the revenues of these municipalities have been adversely impacted by the sustained low-level of oil prices. Additionally, some of these municipalities had been put on credit watch and subsequently received downgrades by credit rating agencies. In consideration of this, along with our own internal credit analysis, we determined that the creditworthiness of these municipalities had significantly deteriorated and that it was reasonably possible that all amounts due would not be collected. Because this increased risk exposure exceeded acceptable levels, we sold certain securities issued by those municipalities. We did not sell any securities issued by these municipalities that are either guaranteed by the Texas Permanent School Fund or secured by U.S. Treasury securities via defeasance of the debt by the issuers because, as a result of these credit enhancements, the collectibility of these securities is not in doubt. Some of the securities we sold were classified as held to maturity prior to their sale. Despite their classification as held to maturity, we believe the sale of these securities was merited and permissible under the applicable accounting guidelines because of the significant deterioration in the creditworthiness of the issuers. Sales of securities held to maturity were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Proceeds from sales | $ | — |  |  | $ | — |  |  | $ | 135,610 |  |  | $ | — |
Amortized cost | — |  |  | — |  |  | 131,840 |  |  | — |
Gross realized gains | — |  |  | — |  |  | 3,770 |  |  | — |
Gross realized losses | — |  |  | — |  |  | — |  |  | — |
Tax (expense) benefit of securities gains/losses | — |  |  | — |  |  | (1,319 | ) |  | — |
Sales of securities available for sale were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Proceeds from sales | $ | — |  |  | $ | — |  |  | $ | 1,060,196 |  |  | $ | 223,987 |
Gross realized gains | — |  |  | — |  |  | 11,133 |  |  | 228 |
Gross realized losses | — |  |  | — |  |  | — |  |  | — |
Tax (expense) benefit of securities gains/losses | — |  |  | — |  |  | (3,897 | ) |  | (80 | )
Premiums and Discounts. Premium amortization and discount accretion included in interest income on securities was as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Premium amortization | $ | (22,219 | ) |  | $ | (20,832 | ) |  | $ | (44,559 | ) |  | $ | (40,838 | )
Discount accretion | 3,138 |  |  | 2,629 |  |  | 5,753 |  |  | 5,327 |
Net (premium amortization) discount accretion | $ | (19,081 | ) |  | $ | (18,203 | ) |  | $ | (38,806 | ) |  | $ | (35,511 | )
Trading Account Securities. Trading account securities, at estimated fair value, were as follows:
| June 30, 2016 |  | December 31, 2015
U.S. Treasury | $ | 13,381 |  |  | $ | 16,443 |
States and political subdivisions | 14,553 |  |  | 136 |
Total | $ | 27,934 |  |  | $ | 16,579 |
Net gains and losses on trading account securities were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Net gain on sales transactions | $ | 351 |  |  | $ | 278 |  |  | $ | 653 |  |  | $ | 558 |
Net mark-to-market gains (losses) | (2 | ) |  | (32 | ) |  | (1 | ) |  | (46 | )
Net gain (loss) on trading account securities | $ | 349 |  |  | $ | 246 |  |  | $ | 652 |  |  | $ | 512 |

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