XML 22 R10.htm IDEA: XBRL DOCUMENT
v3.20.2

Securities | 6 Months Ended
--- | ---
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract] |
Securities | Securities Securities - Held to Maturity. A summary of the amortized cost, fair value and allowance for credit losses related to securities held to maturity as of June 30, 2020 and December 31, 2019 is presented below.
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Allowance for Credit Losses |  | Net Carrying Amount
June 30, 2020 |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | 529,868 |  |  | $ | 45,243 |  |  | $ | — |  |  | $ | 575,111 |  |  | $ | — |  |  | $ | 529,868 |
States and political subdivisions | 1,437,758 |  |  | 59,072 |  |  | — |  |  | 1,496,830 |  |  | (172) |  |  | 1,437,586 |
Other | 1,500 |  |  | — |  |  | — |  |  | 1,500 |  |  | — |  |  | 1,500 |
Total | $ | 1,969,126 |  |  | $ | 104,315 |  |  | $ | — |  |  | $ | 2,073,441 |  |  | $ | (172) |  |  | $ | 1,968,954 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | 530,861 |  |  | $ | 22 |  |  | $ | 9,365 |  |  | $ | 521,518 |  |  | $ | — |  |  | $ | 530,861 |
States and political subdivisions | 1,497,644 |  |  | 28,909 |  |  | 896 |  |  | 1,525,657 |  |  | — |  |  | 1,497,644 |
Other | 1,500 |  |  | — |  |  | — |  |  | 1,500 |  |  | — |  |  | 1,500 |
Total | $ | 2,030,005 |  |  | $ | 28,931 |  |  | $ | 10,261 |  |  | $ | 2,048,675 |  |  | $ | — |  |  | $ | 2,030,005 |
All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. The carrying value of held-to-maturity securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law was $557.7 million and $561.4 million at June 30, 2020 and December 31, 2019, respectively. Accrued interest receivable on held-to-maturity securities totaled $22.1 million and $21.1 million at June 30, 2020 and December 31, 2019, respectively and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets. From time to time, we have reclassified certain securities from available for sale to held to maturity. During the fourth quarter of 2019, we reclassified securities with an aggregate fair value of $377.8 million and an aggregate net unrealized gain of $3.3 million ($2.6 million, net of tax) on the date of the transfer. The net unamortized, unrealized gain remaining on transferred securities, including those transferred in 2019 and in years prior, included in accumulated other comprehensive income in the accompanying balance sheet totaled $4.1 million ($3.2 million, net of tax) at June 30, 2020 and $4.8 million ($3.8 million, net of tax) at December 31, 2019. 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. The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts and (v) whether or not such securities are guaranteed by the Texas Permanent School Fund (“PSF”) or pre-refunded by the issuers. The following table summarizes Moody's and/or Standard & Poor's bond ratings for our portfolio of held-to-maturity securities issued by States and political subdivisions and other securities as of June 30, 2020:
| States and Political Subdivisions |  |  |  |  |  |  |  |
| Not Guaranteed or Pre-Refunded |  | Guaranteed by the Texas PSF |  | Pre-Refunded |  | Total |  | Other Securities
Aaa/AAA | $ | 131,304 |  |  | $ | 840,004 |  |  | $ | 292,036 |  |  | $ | 1,263,344 |  |  | $ | — |
Aa/AA | 111,427 |  |  | — |  |  | — |  |  | 111,427 |  |  | — |
A | 62,987 |  |  | — |  |  | — |  |  | 62,987 |  |  | — |
Not rated | — |  |  | — |  |  | — |  |  | — |  |  | 1,500 |
Total | $ | 305,718 |  |  | $ | 840,004 |  |  | $ | 292,036 |  |  | $ | 1,437,758 |  |  | $ | 1,500 |
Historical loss rates associated with securities having similar grades as those in our portfolio have generally not been significant. Furthermore, as of June 30, 2020, there were no past due principal or interest payments associated with these securities. The PSF is a sovereign wealth fund which serves to provide revenues for funding of public primary and secondary education in the State of Texas. Based upon (i) the PSF's AAA insurer financial strength rating, (ii) the PSF's substantial capitalization and excess guarantee capacity and (iii) a zero historical loss rate, no allowance for credit losses has been recorded for securities guaranteed by the PSF as there is no current expectation of credit losses related to these securities. Pre-refunded securities have been defeased by the issuer and are fully secured by cash and/or U.S. Treasury securities held in escrow for payment to holders when the underlying call dates of the securities are reached. Accordingly, no allowance for credit losses has been recorded for securities that have been defeased as there is no current expectation of credit losses related to these securities. The following table details activity in the allowance for credit losses on held-to-maturity securities during the three and six months ended June 30, 2020.
| Three Months Ended June 30, 2020 |  | Six Months Ended June 30, 2020
Beginning balance | $ | 200 |  |  | $ | — |
Impact of adopting ASC 326 | — |  |  | 215 |
Credit loss expense (benefit) | (28) |  |  | (43) |
Ending balance | $ | 172 |  |  | $ | 172 |
Securities - Available for Sale. A summary of the amortized cost, fair value and allowance for credit losses related to securities available for sale as of June 30, 2020 and December 31, 2019 is presented below.
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Allowance for Credit Losses |  | Estimated Fair Value
June 30, 2020 |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 1,117,867 |  |  | $ | 45,768 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,163,635 |
Residential mortgage-backed securities | 2,051,686 |  |  | 79,604 |  |  | 3 |  |  | — |  |  | 2,131,287 |
States and political subdivisions | 6,725,404 |  |  | 544,091 |  |  | — |  |  | — |  |  | 7,269,495 |
Other | 42,279 |  |  | — |  |  | — |  |  | — |  |  | 42,279 |
Total | $ | 9,937,236 |  |  | $ | 669,463 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 10,606,696 |
December 31, 2019 |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 1,941,283 |  |  | $ | 18,934 |  |  | $ | 12,084 |  |  | $ | — |  |  | $ | 1,948,133 |
Residential mortgage-backed securities | 2,176,275 |  |  | 32,608 |  |  | 1,289 |  |  | — |  |  | 2,207,594 |
States and political subdivisions | 6,717,344 |  |  | 353,857 |  |  | 204 |  |  | — |  |  | 7,070,997 |
Other | 42,867 |  |  | — |  |  | — |  |  | — |  |  | 42,867 |
Total | $ | 10,877,769 |  |  | $ | 405,399 |  |  | $ | 13,577 |  |  | $ | — |  |  | $ | 11,269,591 |
All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. At June 30, 2020, nearly all of the securities in our available for sale municipal bond portfolio were issued by the State of Texas or political subdivisions or agencies within the State of Texas, of which approximately 70.7% are either guaranteed by the PSF or have been pre-refunded. 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 available-for-sale securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law was $3.2 billion and $3.4 billion at June 30, 2020 and December 31, 2019, respectively. Accrued interest receivable on available-for-sale securities totaled $114.3 million and $115.9 million at June 30, 2020 and December 31, 2019, respectively, and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets. The table below summarizes, as of June 30, 2020, securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by type of security and length of time in a continuous unrealized loss position.
| Less than 12 Months |  |  |  | More than 12 Months |  |  |  | Total |  |
| Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses
Residential mortgage-backed securities | $ | 1,243 |  |  | $ | 2 |  |  | $ | 127 |  |  | $ | 1 |  |  | $ | 1,370 |  |  | $ | 3 |
Total | $ | 1,243 |  |  | $ | 2 |  |  | $ | 127 |  |  | $ | 1 |  |  | $ | 1,370 |  |  | $ | 3 |
As of June 30, 2020, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality. This is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors (such as a PSF guarantee) related to our available for sale securities and in consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, 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. The unrealized losses are 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 securities approach their maturity date or repricing date or if market yields for such investments decline. Contractual Maturities. The following table summarizes the maturity distribution schedule of securities held to maturity and securities available for sale as of June 30, 2020. Mortgage-backed securities are included in maturity categories based on their stated maturity date. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Other securities classified as available for sale include stock in the Federal Reserve Bank and the Federal Home Loan Bank, which have no maturity date. These securities have been included in the total column only.
| Within 1 Year |  | 1 - 5 Years |  | 5 - 10 Years |  | After 10 Years |  | Total
Held To Maturity |  |  |  |  |  |  |  |  |
Amortized Cost |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | — |  |  | $ | 285 |  |  | $ | 516,618 |  |  | $ | 12,965 |  |  | $ | 529,868 |
States and political subdivisions | 25,717 |  |  | 339,996 |  |  | 425,582 |  |  | 646,463 |  |  | 1,437,758 |
Other | — |  |  | 1,500 |  |  | — |  |  | — |  |  | 1,500 |
Total | $ | 25,717 |  |  | $ | 341,781 |  |  | $ | 942,200 |  |  | $ | 659,428 |  |  | $ | 1,969,126 |
Estimated Fair Value |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | — |  |  | $ | 287 |  |  | $ | 560,606 |  |  | $ | 14,218 |  |  | $ | 575,111 |
States and political subdivisions | 25,991 |  |  | 353,852 |  |  | 439,542 |  |  | 677,445 |  |  | 1,496,830 |
Other | — |  |  | 1,500 |  |  | — |  |  | — |  |  | 1,500 |
Total | $ | 25,991 |  |  | $ | 355,639 |  |  | $ | 1,000,148 |  |  | $ | 691,663 |  |  | $ | 2,073,441 |
Available For Sale |  |  |  |  |  |  |  |  |
Amortized Cost |  |  |  |  |  |  |  |  |
U. S. Treasury | $ | 33,986 |  |  | $ | 1,083,881 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,117,867 |
Residential mortgage-backed securities | 126 |  |  | 57,223 |  |  | 5,424 |  |  | 1,988,913 |  |  | 2,051,686 |
States and political subdivisions | 241,102 |  |  | 411,156 |  |  | 658,064 |  |  | 5,415,082 |  |  | 6,725,404 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 42,279 |
Total | $ | 275,214 |  |  | $ | 1,552,260 |  |  | $ | 663,488 |  |  | $ | 7,403,995 |  |  | $ | 9,937,236 |
Estimated Fair Value |  |  |  |  |  |  |  |  |
U. S. Treasury | $ | 34,067 |  |  | $ | 1,129,568 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,163,635 |
Residential mortgage-backed securities | 133 |  |  | 59,793 |  |  | 5,967 |  |  | 2,065,394 |  |  | 2,131,287 |
States and political subdivisions | 243,001 |  |  | 444,100 |  |  | 714,089 |  |  | 5,868,305 |  |  | 7,269,495 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 42,279 |
Total | $ | 277,201 |  |  | $ | 1,633,461 |  |  | $ | 720,056 |  |  | $ | 7,933,699 |  |  | $ | 10,606,696 |
Sales of Securities. Sales of securities available for sale were as follows:
| Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
Proceeds from sales | $ | 51,250 |  |  | $ | 2,346,626 |  |  | $ | 1,162,352 |  |  | $ | 3,291,529 |
Gross realized gains | — |  |  | 803 |  |  | 108,989 |  |  | 803 |
Gross realized losses | — |  |  | (634) |  |  | — |  |  | (634) |
Tax (expense) benefit of securities gains/losses | — |  |  | (35) |  |  | (22,888) |  |  | (35) |
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, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
Premium amortization | $ | (30,988) |  |  | $ | (29,408) |  |  | $ | (63,333) |  |  | $ | (59,287) |
Discount accretion | 571 |  |  | 1,378 |  |  | 1,156 |  |  | 2,561 |
Net (premium amortization) discount accretion | $ | (30,417) |  |  | $ | (28,030) |  |  | $ | (62,177) |  |  | $ | (56,726) |
Trading Account Securities. Trading account securities, at estimated fair value, were as follows:
| June 30, 2020 |  | December 31, 2019
U.S. Treasury | $ | 24,495 |  |  | $ | 24,298 |
Total | $ | 24,495 |  |  | $ | 24,298 |
Net gains and losses on trading account securities were as follows:
| Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
Net gain on sales transactions | $ | 304 |  |  | $ | 552 |  |  | $ | 774 |  |  | $ | 1,058 |
Net mark-to-market gains (losses) | (22) |  |  | 27 |  |  | 93 |  |  | 31 |
Net gain (loss) on trading account securities | $ | 282 |  |  | $ | 579 |  |  | $ | 867 |  |  | $ | 1,089 |

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsDebtAndEquitySecuritiesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration